• Change has yet to come to the BOC

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    THE numbers are in, and once again, the Bureau of Customs, a vital revenue agency of the Philippine government, fell short of its collection target for the month of August.

    The BOC reported on Friday that it had collected P32.65 billion last month, which fell short of its goal of P34.3 billion by 4.8 percent.

    The agency highlighted, however, that August’s collection total was 21.4 percent higher than the P26.89 billion collected in the same month a year earlier, implying that even if it had fallen short of its target, it was still an improved performance.

    In literal terms that may be true, but the year-on-year comparison is somewhat misleading. The August 2015 benchmark of P26.89 billion was P2.2 billion less than August 2014’s P29.1 billion, a decline of 7 percent. The gain this year is not quite as impressive when it is measured from a depressed reference point.

    And no matter how much the BOC, or its parent agency the Department of Finance, tries to spin August’s collection performance in a positive way, the bottom line is it failed – again – to meet its revenue goal, and that is not all an insignificant problem. The reason, of course, is that government revenue determines the national budget; having been planned with the revenue agencies’ targets in mind, failing to meet those targets means the deficit has to be made up elsewhere; in the case of August, that means potentially P1.65 billion has to be excised from other programs, or taken on as new debt to balance the budget.

    There are many reasons why BOC collections can fall short of their goal, some of which have been cited by the agency in its explanation for the gap. August is traditionally considered the “ghost month,” when business in this part of the world slackens. Oil prices have stabilized somewhat but remain low, and this in turn reduces the value of many imported products. Global trade is also depressed right now, as we have been reporting for the past several weeks. And, given the traditional impression or reputation of the BOC as a troublesome agency, it is not an entirely unreasonable assumption that some potential revenue was lost due to corruption or inefficiency.

    Yet none of those reasons, all but the last being things that are beyond the control of the BOC, are entirely valid. While imports may have slowed in August – we will not know that for a couple months yet – it seems unlikely; through June, the latest month for which the Philippine Statistical Authority has data, imports have grown every month by an average of more than 21 percent on a year-on-year basis. Oil prices are low, certainly; but they have been “low” for more than a year, and more than enough time for revenue forecasts to take that factor into proper account. And while August may be a “ghost month” here, it is ordinarily one of the peak months for trade across the globe as businesses build up inventories ahead of the holiday season; in any event, the stagnation of global trade this year does not seem to have affected the Philippines much, as both of Manila’s major container terminals have within just the past few weeks reported at least modest growth in volume of cargo handled throughout the year so far.

    Whatever the reason or convergence of reasons responsible for the shortfall, it is a shortfall nonetheless, and creates a significant financial management problem for the government. BOC Commissioner Nicanor Faeldon apparently does not see it that way, however; as quoted in our news report following the release of the BOC revenue data, Faeldon said, “If we judge the agency based on revenue collection alone, then we’ll miss the other two mandates of BOC,” he said, referring to border control and trade facilitation.

    “Among other things we do in the agency, we’re fixing corruption here. Why don’t you take a look at it?” he added.

    With all due respect to the Commissioner, the qualitative aspects of the BOC’s performance, while very important and not to be disregarded, are still less significant than its performance as a source of government revenue. Good performance on a qualitative basis should, after all, be reflected in the BOC’s meeting expectations of what it will contribute to the national coffers.

    Whether its failure to do so last month was a breakdown in planning, execution, or some of both, it is clear that much work remains to be done before anyone can say change has come to one of the country’s most problematic agencies.

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