By Lawrence Agcaoili

The Finance Department is set to significantly slash the collection targets of the Bureau of Internal Revenue and the Bureau of Customs this year due to weak economic conditions.

Sources said the Finance Department was now finalizing the revised collection targets of both agencies after the Development Budget Coordination Committee finally approved on Friday the planned increase in the country’s budget deficit goal this year.

The economic managers agreed to raise the budget deficit ceiling to P160 billion, or 2.0 percent of the gross domestic product, instead of the revised target of P102 billion or 1.2 percent of GDP this year.

This is the second time that the DBCC revised its budget shortfall this year. It originally expected the deficit to hit P40 billion, or 0.5 percent of GDP, from P75 billion or 1.0 percent of GDP in 2008.

The administration of President Gloria Macapagal Arroyo abandoned its commitment to balance the budget in 2008 due to adverse external developments brought about by high oil and food prices as well as the financial meltdown in the US.

DBCC sources said the global economic crisis had finally convinced the Finance Department to reconsider its tax collection targets this year as the slackening economy would result in lower tax take for both the BIR and Customs.

The sources said it would be impossible for both agencies to meet their collection targets this year in light of the revised macroeconomic assumptions.

Late last year, the Finance Department agreed to lower the assessed collection target of the BIR due to the economic slowdown but raised the target of Customs because of the continued weakening of the peso against the US dollar.

The department agreed to lower the projected collection of the BIR to P915 billion or P53.3 billion lower than the P968.3 billion target this year but increased the target of Customs to P310 billion, or P9.9 billion higher than the original target of P300.1 billion.