The government managed to cap the tax expenditures given to government owned and controlled corporations to P45 billion in 2009, P10 billion less than the estimated P55 billion.

For one, documents show that National Food Authority (NFA) whose tax subsidy totaled P37.3 billion in 2008 had a lower tax subsidy last year of P20.5 billion since NFA’s rice imports were considerably reduced compared to 2008 volume.

Tax subsidies are budgeted and are automatic appropriations for use by government agencies and corporations based on Presidential Degree No.1177 of 1986. In the case of the NFA, the tax support covers the 50-percent tariff imposed on all rice imports.
The agency accounts for about 60 percent of tax expenditure fund.

The original budget for 2009 was only P23.37 billion but because of additional budgets requested by the NFA, National Power Corp. and the Bases Conversion Development Authority, officials estimated that the emerging total was P55 billion.

As of the end of November, tax expenditures amounted to P45 billion, down by 16.2 percent year-on-year. For the month of November alone, total tax subsidy was P1.2 billion, 81 percent lower compared to November 2008.

TEF’s are appropriated budgets but GOCCs are allowed to make additional tax subsidy requests to the Department of Budget and Management when needed. These funds are used to support the tax expenditures of government agencies and GOCCs.

The tax subsidy exceeded the first half program because of additional requirements by Napocor of P5.3 billion for its 2006 and 2007 value-added tax liabilities. BCDA also took out P2.8-billion tax subsidy for its Subic-Tarlac Expressway project. In 2008, the tax subsidy totaled P53.9 billion, exceeding the budget of only P25 billion because of NFA’s requirements.