"(The US custody issue) should not have an impact on these grants," Finance Secretary Margarito B. Teves said. "This issue had an immediate impact on the VFA (Visiting Forces Agreement) between the two governments .. but in terms of grants – at least the ones that we’re normally looking at … I’d like to graduate ourselves from (these grants)," he added.

The Philippines usually gets grants from the USAID and the Millennium Challenge, which is $ 1.5billion US-funded development assistance for poor nations. USAID in the meantime was established in 1961 (during the time of President John F. Kennedy) and is the largest donor of grant assistance.

If the government wishes to take out loans, they get it from the World Bank, Asian Development Bank and from the international market via the sale of sovereign bonds.

Teves said he intends to negotiate for at least $ 200 million grant from USAID to upgrade the systems of the Bureau of Internal Revenue. The DoF will prepare proposals to the US Congress to increase grants to the BIR. A portion of the amount, if approved, will go to the Department of Justice in aid of tax evasion cases.

"The DOF (in terms of funding) would have to help the DOJ fast track the movement of tax suits … we have too many fraud and evasion cases and we need to process these very quickly," said Teves in an earlier interview. The funding would strengthen the existing memorandum of agreement between the DoF and the DoJ.

As for the Millennium Challenge, Teves said the government will propose to upgrade status from "threshold" to "compact" levels, which will automatically raise grants for the country.

"If we do it well in some indicators like on health and education as well as our program of anti-corruption like our program of running after tax evaders and smugglers, then maybe we’ll have a big chance to go to a higher level (compact account)," said Teves. "At that level we can anticipate higher assistance from $ 100 million to $ 300 million from only $ 21 million right now … so that’s a big support for our agencies (such as BIR and DoJ)."

The agency administering the US Millennium Challenge has placed the Philippines under a threshold program. Threshold countries are ones that barely made it, in terms of requirements, but demonstrate a commitment to improving policy reform.

A "threshold status," also means that a country is not eligible for higher grants.

But Teves is confident the Philippines can secure higher grants from donors, especially USAID. He said Washington gave Ghana more than $ 200 million in funding to improve their tax collection. "We would like to negotiate for the same and use the money to correct our tax problems."

BIR Commissioner Jose Mario Bunag said to achieve the P784.1-billion collection target this year the agency will have to upgrade systems and hire more people. The 2007 target is 16 percent higher than P675 billion last year.

Bunag said tax administration is not just a matter of "squeezing money out of the system (but also) increasing transparency and putting mechanisms in place." And they need funding to do this, he added.