Philippines Needs Tax Measures as Asset Sales Cool, Teves Says

By Clarissa Batino

Nov. 14 (Bloomberg) -- The Philippine government, predicting asset sales will cool next year, said it wants lawmakers to pass new tax measures that may boost state income by 35 billion pesos ($710 million) to help fund public works spending.

Revenue from asset sales will probably drop in 2009 as the global economic slump and tight credit conditions sap investors' appetite, Finance Secretary Gary Teves said in a telephone interview in Manila today. The government plans to sell its shares in PNOC Exploration Corp. and state-owned land held by Food Terminal Inc., each worth about 15 billion pesos, he said.

``Market conditions are tough and it's not as easy as it was in 2007 to privatize, that's why we're allowing for a larger deficit,'' Teves said. ``We're hoping Congress would approve the measures we've been proposing'' such as reducing tax breaks.

The Southeast Asian nation this week said the budget deficit will likely widen to as much as 102 billion pesos in 2009 from an estimated 75 billion pesos this year. The government expects revenue growth to falter amid a looming global recession even as it spends to spur growth, putting at risk a plan to balance the budget in 2010, President Gloria Arroyo's last year in office.

Arroyo's government wants to cut down on tax breaks and simplify the levy on cigarettes and liquor by tying the rate to inflation, Teves said. Lawmakers can also help the government improve spending on roads and ports by approving the 1.42 trillion-peso 2009 budget as soon as possible, he said.

``We need to accelerate spending to create jobs and help the economy,'' Teves said. The government expects growth to slow to an eight-year low in 2009 on weak exports.

San Miguel

Asset sales reached about 90 billion pesos in 2007, reducing the budget gap to the lowest since the Philippines started incurring deficits in 1998.

The sale of shares in San Miguel Corp., worth about 50 billion pesos, isn't planned for 2009 because of unresolved ownership issues, Teves said. The sale of government's 40 percent stake in Petron Corp. as early as this month may add 25 billion pesos to revenue and offset lower tax collections, he said.

The government may rely more on financing from the World Bank and Asian Development Bank for the $2.5 billion planned foreign borrowing in 2009, the finance chief said.

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net