Strong and buoyant, productive and efficient, simple and equitable these are the ideal characteristics of a tax system. These are also the qualities which the Philippine tax system did not have.

The absence of these qualities proved costly to government and the public whom it serves. Many roads were not constructed; needed schools were not built; public utilities deteriorated, and health services remained inadequate. The perennial lack of funds led to chronic budget deficits resulting to price increases of basic goods and services.

The privatization of government assets provided a temporary answer to the shortage of public funds. Government also borrowed heavily from the market to finance the budgetary deficit. But these measures did not ensure the long-term financial stability of the country. The proceeds from privatization were non-recurrent. Government borrowings on the other hand competed with the private sector for funds and used a significant amount of public resources for debt servicing. Thus, government

To ensure a comprehensive, consistent and a structural approach to tax reform, a Presidential Task Force on Tax and Tariff Reforms was then created by then President Fidel V. Ramos through Administrative Order no.112 on February 10, 1994. The Task Force was multi-sectoral in composition with membership from government, the private sector, and the academe. It was chaired by the Secretary of Finance. The objective of the Task Force was to conduct intensive studies and public consultations to reform the tax system.

This task proved difficult. A basic issue that confronted the Task Force was the country's very low tax collection effort. In 1994, the Philippines was one of the lowest performers in Asia, in terms of tax collection. For instance, the ratio of tax collection to Gross National Product stood at 15.4 percent which was the lowest in the region. This was despite the fact that the tax rates in the Philippines were higher than the tax rates in many countries in Southeast Asia. The country's corporate tax rate of 35% in 1994 was higher than the rates in Malaysia (32%); Singapore (27%); and Thailand (30%).

The country was also not collecting corporate tax efficiently as can be gleaned from the contribution of the corporate tax to total revenues. In 1994, it stood at only 15 percent which paled in comparison with the strength of the corporate tax as a revenue-raiser in Malaysia where 35.2 percent of the total revenues came from the corporate tax. The ratio in Indonesia was much higher at 49 percent.

Inevitably, one asks "why"? And the members of the Task Force were one in saying that it was because of the ever-thinning tax base that was brought about by a number of factors.

One factor was the huge amount of revenues foregone due to tax exemptions which equaled P31.7 billion in 1994. This was roughly equivalent to 75 percent of corporate tax collection.

These realities served as take-off points for the package of recommendations which formed the Comprehensive Tax Reform Program (CTRP), a package of reforms which aimed to establish a more progressive tax system that is economically efficient and socially equitable. The CTRP is a structural reform of the tax system and is not merely a package consisting of new taxes or higher tax rates.

As contained in House Bill 6060, the CTRP was presented before Congress through the House of Representatives on February 1, 1996 and was intensively discussed and deliberated upon by both Houses of Congress. The excise tax reform was enacted into law as Republic Act 8240 on November 22, 1996 while the income tax reforms were signed into law on December 11, 1997 as Republic Act (RA) 8424, " The Tax Reform Act of 1997". Senator Juan Ponce Enrile was the major sponsor and advocate of the CTRP from Congress.

Considered to be pro-poor and pro-progress, the CTRP is made up of measures, which generate additional revenues by:

• broadening the tax base by capturing undeclared revenues and "hidden" taxpayers
• removing areas of discretion which provide avenues for tax avoidance and abuse
• simplifying the tax system thereby encouraging greater compliance from taxpayers including those in the underground economy
• improving the taxation of hard-to-tax incomes
• reducing income tax rates to enhance the competitiveness of the Philippines in the region
• instituting measures that protect taxpayers from harassment and which strengthen efficient enforcement of laws.