Budget (from French bougette) generally refers to a list of all planned expenses and revenue. A budget is an important concept in economics, which uses a budget line to illustrate the trade-offs between two or more goods.
Government budget is a legal document that is often passed by the legislature, and approved by the chief executive. For example, only certain types of revenue may be imposed and collected. Property tax is frequently the basis for local revenues, while sales tax (E-VAT), income tax, and corporate tax are the basis for national revenues.
Government budgeting is the critical exercise of allocating revenues and borrowed funds to attain the economic and social goals of the country. It also entails the management of government expenditures in such a way that will create the most economic impact from the production and delivery of goods and services while supporting a healthy fiscal position. Government budgeting is important because it enables the government to plan and manage its financial resources to support the implementation of various programs and projects that best promote the development of the country. Through the budget, the government can prioritize and put into action its plants, programs and policies within the constraints of its financial capability as dictated by economic conditions
The two basic elements of a government budget are the revenues (receipts) and expenses (outlays). A government budgets have an economic, political, and technical basis. Unlike a pure economic budget, they are not entirely designed to allocate scarce resources for the best economic use. They have a political basis wherein different interests push and pull in an attempt to obtain benefits and avoid burdens. The technical element is the forecast of the likely levels of revenues and expenses.
Background of Government Budgeting in the Philippines
At the beginning of the 20th Century, the Second Philippine Commission, acting as a legislative body, enacted appropriations measures for the annual expenditures of the government. This was in accordance with the Philippine Bill of 1902, which decreed that disbursements from the National Treasury were to be authorized only in pursuance of appropriations made by law.
With the passage of the Jones Law in 1916, the Philippine Legislature was set up with two chambers: the Philippine Senate and the House of Representative. The Governor-General was to submit, within 10 days of the opening of the Legislature’s regular session, the annual budget. Two years later, the Council of the State was formed to prepare the budget that the Governor-General was required to submit to the Philippine Legislature.
A Budget Office was formed to assist in the preparation, enactment and implementation of such appropriations made by law. Four divisions made up the Office: A Budget Division took charge of agency regular budgets; an Expense-Central Division took care of special budgets; a Service Inspection Division screened appointments and requests for the creation of positions; and an Administrative Division handled routine administrative matters.
The Constitution of 1935 established both budget policy and procedure, which were amplified in a series of laws and executive acts over the years.
The Budget Commission was established by Executive Order (EO) No. 25 issued on April 25, 1936. It became a Ministry by virtue of Presidential Decree (PD) No. 1405, signed on June 11, 1978. Following the pattern in the United States Federal Government, the Budget Commission was, and the Ministry of the Budget continues to be, part of the Office of the President and separate from the other fiscal agencies of government that form part of the Ministry of Finance.
The first Budget Law was passed on December 17, 1937 as Commonwealth Act (CA) No. 246. It took effect on January 1, 1938, providing for a line-item budget as the framework of the government’s budgeting system. CA No. 246 called for a “balanced budget” emphasizing matching proposed expenditures with existing revenues.
On June 4, 1954, Republic Act (RA) No. 992, otherwise called the Revised Budget Act, was enacted providing for an enhanced role of the Budget Commission as the fiscal arm and budgeting adviser of the President. The preparation of the budget was to include the aggregation of the programs of the different departments and agencies of the Government. At this point, a performance budgeting system was introduced.
The Integrated Reorganization Plan of 1972, under Presidential Decree No. 1, implanted re-organizational changes in the Budget Commission with four of its units retained: the Budget Operations Office; National Accounting Office; Management Office; and Wage and Position Classification Office (WAPCO). Five staff units were provided the Commission: for planning service; for financial and administrative services; or training and information services; a Legislative Staff; and a Data Processing Center.
The change to a parliamentary form of government was instituted by the 1973 Constitution. The legislative branch of the government then referred to as the Batasang Pambansa; saw the minister in charge of the budget, chairing the Committee on Appropriations and Reorganization. Through the Budget Reform Decree of 1977, the planning, programming and budgeting linkages of the Ministry were further strengthened.
The 1973 Philippine Constitution was superseded by the Provisional Constitution under Proclamation No. 3 of President Corazon C. Aquino. The legislative power was temporarily reposed on the President. Budgetary functions once more were exercised by the Office of Budget and Management.
EO No. 292, issued pursuant to the 1987 Constitution, provided for major organizational subdivisions of the Department of Budget and Management.
In 1992, under Fidel V. Ramos, government budgeting aimed to make the National Budget an instrument for breaking the boom and bust cycle that had characterized the Philippine economy in the past. Beyond sustaining the operations of government and its projects, the budget became an economic stimulus and a means to disperse the gains of economic development.
At the outset of Joseph Estrada’s presidency, the Asian financial crisis that characterized the period prompted the national leadership to take a second look at the country’s economic policies and strategies. To maintain macroeconomic stability in light of the effects of the economic turmoil, the government had to raise domestic demand by sustaining expenditures and pump-priming the areas of public infrastructure and social services. It had to adopt an expansionary fiscal policy by allowing a reasonable level of cyclical deficit to be financed largely through foreign borrowing while offsetting the negative impact of deficit by introducing structural reforms in the budget process.
During this period, from mid-1998 to end of 2000, the DBM continued to introduce budgeting reforms that were meant to improve cash management, reduce uncertainty in allotment and cash flow, and enhance transparency and accountability.
Under President Gloria Macapagal-Arroyo, the DBM focused its efforts on deepening fiscal responsibility, enhancing the efficiency of public expenditures, and promoting good governance. Along with these major areas of concern, it intensified efforts at strengthening inter-governmental relations, eliciting increased participation from the private sector in the overall budget process and in intensifying public information on the administration’s fiscal policy, thrusts, and budget policies and procedures. It likewise stepped up efforts at enhancing internal management in line with its vision to be seen as an organization that influences the spending behavior and management of resources of agencies towards transparency, equity and accountability.
Because the Philippines have a republican-presidential system of government, we need to distinguish between different types of government: national and local government. Thus government budget is prepared both in the local level and national level. But this report will focus mainly on the government national budget.
Government national budget summarizes all three types of effects on aggregate demand: purchases, transfers, and taxes. The overall budget totals do not distinguish between purchases and transfers. Rather, purchases of goods and services and transfers are lumped together as government outlays. And all taxes and duties collected are lumped together as government receipts.
Government expenditure (outlays) consists of purchase and transfer. Purchases involve the use of goods and services by the government, whereas transfers move funds to people outside the government.
Government revenue (receipts) consists of tax and non-tax receipts of the government.
Balance budget when government outlays equals government receipts.
Budget deficit when government expenditure (outlay) exceeds government receipts. It is the excess of government spending on goods and services over net tax revenue.
Budget surplus when government receipts exceed government expenditures (outlay).
Theories and Practice in Budgeting
Strong Aggregate Fiscal Discipline
Synchronized Planning and Programming-Budgeting System (1990) – Memorandum Order No. 295 was issued to enhance planning-programming-budgeting linkage.
Strengthening Oversight Control over Fiscal Program (1991)-the DBM and the DOF initiated the creation of an inter-agency committee on cash programming composed of representatives from the DBM, DOF, BTr, and the BSP. Notices of Cash Allocation (NCA) were issued based on the level of disbursement ceilings determined by the committee.
Baseline Budgeting Scheme (1994) – this scheme was adopted to ensure a fair, transparent and relatively simple methods of allocating government resources.
Accountability reporting (1991) – the DBM issued National Budget Circular 442 requiring all agencies for certain accountability reports on a regular basis.
Devolution of national government function (1992) – The passage of the Local Government Code of 1991 provided for the devolution of national government functions to Local Government Units in 1992 for more efficient and effective public service.
Extension of Validity of all Expenditures and Increase in Flexibility to Realign (1992 and 1996) – in 1992, capital outlays was extended and made valid for two years. Provision to extend the validity of unutilized appropriation including, MOOE up to the end of the succeeding year was incorporated in the 1996 budget in order to encourage agencies to save and curb the tendency to the spending of remaining appropriation at the end of the year.
Salary Standardization Law II (1993-1997) – this was implemented to raise the morale of civil servants caused by pay disparity between private and public sectors.
Use of Information Technology by DBM (1994-onwards) – the DBM recognizing the role of IT as an enabler in the improvement of the delivery of its services, developed as series of computerization projects and improvements in the current systems.
Simplified Fund Release System (1995) – this system was implemented to expedite and standardize the release of funds across agencies in line with the policy thrust of the government.
Approaches and Techniques in Budgeting
The adoption of baseline budgeting or costing of existing policies since 1993, the encouragement of agency savings or efficiency gains by agencies to support new program was initiated. The one-year budgeting framework was abandoned for lack of strategic prioritization system to enable the restructuring of the budget towards priority and desired areas and the more gradual adjustment towards fiscal consolidation. On the other hand a multi-year budgeting framework was adopted to track the implications of multi-year expenditure approvals in view of the multi year-projects funded by multilateral donors well beyond what can be supported by the annual budget. The adoption of a public expenditure management program framework due to the demand for better public services and the clamor transparency and conservatism in government financial operations by the international investors amidst shrinking government revenues due to trade liberalization.
Process and Procedures in Budgeting in the Philippines
Budgeting for the national government involves four (4) distinct processes or phases: budget preparation, budget authorization, budget execution and accountability While distinctly separate, these processes overlap in the implementation during a budget year.
Budget preparation for the next budget year proceeds while government agencies are executing the budget for the current year and at the same time engaged in budget accountability and review of the past year’s budget.
The preparation of the annual budget involves a series of steps that begins with the determination of the overall economic targets, expenditure levels, revenue projection and the financing plan by the Development Budget Coordinating Committee (DBCC). The DBCC is an inter-agency body composed of the DBM Secretary as Chairman and the Bangko Sentral Governor, the Secretary of the Department of Finance, the Director General of the National Economic and Development Authority and a representative of the Office of the President as members. The major activities involved in the preparation of the annual national budget include the following:
- Determination of overall economic targets, expenditure levels and budget framework by the DBCC;
- Issuance by the DBM of the Budget Call which defines the budget framework; sets economic and fiscal targets; prescribe the priority thrusts and budget levels; and spells out the guidelines and procedures, technical instructions and the timetable for budget preparation;
- Preparation by various government agencies of their detailed budget estimates ranking programs, projects and activities using the capital budgeting approach and submission of the same to DBM;
- Conduct a budget hearings were agencies are called to justify their proposed budgets before DBM technical panels;
- Submission of the proposed expenditure program of department/agencies/special for confirmation by department/agency heads.
- Presentation of the proposed budget levels of department/agencies/special purpose funds to the DBCC for approval.
- Review and approval of the proposed budget by the President and the Cabinet;
- Submission by the President of proposed budget to Congress.
- To meet the Constitutional requirement for the submission of the President’s budget with 30 days from the opening of each regular session of Congress, the budget preparation phase is guided by a budget calendar.
How does the budget become a law?
In accordance with the requirements of the Constitution, the President submits his/her proposed annual budget in the form of Budget of Expenditure and Sources of Financing (BESF) supported by details of proposed expenditures in the form of a National Expenditure Program (NEP) and the President’s Budget Message, which summarizes the budget policy thrusts and priorities for the year.
In Congress, the proposed budget goes first to the House of Representatives, which assigns the task of initial budget review to its Appropriation Committee.
The Appropriation Committee together with the other House Sub-Committee conducts hearings on the budgets of departments/agencies and scrutinizes their respective programs/projects. Consequently, the amended budget proposal is presented to the House body as the General Appropriations Bill.
While budget hearings are on going in the House of Representatives, the Senate Finance Committee, through its different subcommittees also starts to conduct its own review and scrutiny of the proposed budget and proposes amendments to the House Budget Bill to the Senate body for approval.
To thresh out differences and arrive at a common version of the General Appropriations Bill, the House and the Senate creates a Bicameral Conference Committee that finalizes the General Appropriations Bill.
What is the General Appropriations Act?
The General Appropriations Act (GAA) is the legislative authorization that contains the new appropriations in terms of specific amounts for salaries, wages and other personnel benefits; maintenance and other operating expenses; and capital outlays authorized to be spent for the implementation of various programs/projects and activities of all departments, bureaus and offices of the government for a given year.
Budget implementation starts with the release of funds to the agencies. To accelerate the implementation of government programs and projects and ensure the judicious use of budgeted government funds, the government adopted the Simplified Fund Release System (SFRS) beginning 1995.
In contrast to the previous system of releasing funds based on individual agency requests, the SFRS is a policy-driven system, which standardized the release of funds across agencies, which are similarly situated in line with specific policy initiatives of the government.
Following the SFRS, the agency budget matrix (ABM) is prepared by the DBM in consultation with the agencies at the beginning of each budget year, upon approval of the annual General Appropriations Act. The ABM is a disaggregation of all the programmed appropriations for each agency into various expenditure categories. As such, the ABM serves as a blueprint, which provides the basis for determining the timing, composition and magnitude of the release of the budget.
Based on updated resources and economic development thrusts and consistent with the cash budget program, the Allotment Release Program (ARP), which prescribes the guidelines in the prioritization of fund releases, is prepared.
The ARP serves as basis for the issuance of either a General Allotment Release Order (GARO) or a Special Allotment Release Order (SARO), as the case maybe, to authorize agencies to incur obligations.
Subsequently, the DBM releases the Notice of Cash Allocation (NCA) on a monthly or quarterly basis. The NCA specifies the maximum amount of withdrawal that an agency can make from a government bank for the period indicated. The Bureau of the Treasury (BTr), replenishes daily the government servicing banks with funds equivalent to the amount of negotiated checks presented to the government servicing banks by implementing agencies.
The release of NCAs by the DBM is based on: 1) the financial requirements of agencies as indicated in their ABMs, cash plans and reports such as the Summary List of Checks Issued (SLCI); and 2) the cash budget program of government and updates on projected resources.
Agencies utilize the released NCAs following the “Common Fund” concept. Under this concept of fund release, agencies are given a maximum flexibility in the use of their cash allocations provided that the authorized allotment for a specific purpose is not exceeded. Project implementation is thus made faster.
Adjustments on the Budget
Adjustments are made on the budget even during implementation primarily because of the following:
- Enactment of new laws – Within the fiscal year, new legislations with corresponding identified new revenue sources are passed which necessitate adjustments in the budget program.
- Adjustments in macroeconomic parameters – The macroeconomic targets considered in the budget are periodically reviewed and updated to reflect the impact of recent developments in the projected performance of the national economy and on the set fiscal program for the year. The relevant indicators affecting the budget aggregates include the following: the Gross National Product (GNP), inflation rate, interest rate, foreign exchange rate, oil prices, and the level of imports. Thus, a sensitivity measure on the impact of these parameters on the budget will determine whether recent macroeconomic developments have a negative or favorable effect on the budget.
Change in resources availabilities – a Budget adjustment is undertaken when additional resources become available such as new grants, proceeds from newly negotiated loans and grants. Corresponding budget adjustments are also made when resources generation falls below the targets.
Cognizant of the fact that no propitious results can be obtained, even with maximum funding, if agency efficiency is low and funds are wastefully spent, systems and procedures are set in place to monitor and evaluate the performance and cost effectiveness of agencies. These activities are subsumed within the fourth and the last phase of the budget process-the budget accountability phase. At the agency level, budget accountability takes the form of management’s review of actual performance or work accomplishment in relation to the work targets of the agency vis-à-vis the financial resources made available.
Also, detailed examinations of each agency’s book of accounts are undertaken by a resident representative of the Commission on Audit (COA) to ensure that all expenses have been disbursed in accordance with accounting regulations and the purpose(s) for which the funds have been authorized.
Role of DBM in the Budgeting Process
No, the role of the DBM in the budgeting process is not limited to national government agencies. It coordinates all three levels of government-national government department/agencies, government-owned and controlled corporations (GOCCs) and local government units (LGUs) – in the preparation, execution and control of expenditures of their corresponding components entities.
The DBM reviews the corporate operating budgets of GOCCs and ensures the proper allocation of cash. The DBM likewise formulates and recommends the budget policy covering the allowable deficit and the criteria for the determination of the appropriate subsidy and equity of GOCCs.
For LGUs, the DBM reviews the annual and supplemental budgets of provinces, and highly urbanized cities and manages the proper allocation and release of the Internal Revenue Allotment (IRA) of LGUs and their share in the utilization of national wealth.
Philippine Expenditure Policies
The Department of Budget and Management has recently initiated a “Public Expenditure Management Improvement Project”. The Project aims to build on the reforms of budgeting systems and processes that have been accelerated in the last six years to complement efforts at decentralization, privatization, and the increasing integration trade and trade-in-service with the global economy.
Program Expenditure Classification (PREXC)
PREXC is restructuring an agency’s budget by grouping all recurring activities as well as projects under the different programs or key strategies being pursued by the agency to meet its objectives and mandates.
PREXC is understanding what every program’s objective is and providing performance indicators (outputs and outcomes) for each.
WHY DO THE PREXC APPROACH?
1 To identify the mandate-based programs and sub-programs of agencies and reflect them in the Budget
2 To help agencies better manage their finances and organizations to produce better results
3 To standardize the form of national budget and make it more understandable
4 To improve Performance-Informed Budgeting by facilitating the assessment of the effectiveness of the agency’s strategies/programs: Societal Outcomes, Sector Outcomes, Organizational Outcomes, Program Outcomes, and Outputs/ Sub-program Outcomes and Outputs Activities, Projects (APs).
HOW DO WE IMPLEMENT PREXC?
A. Group Activities and Projects under Programs or Sub-programs
1 Group activities and projects (Locally-Funded Projects (LFPs) and ForeignAssisted Projects (FAPs)) that share common outcome.
2 Determine the program or sub-program based on the grouping done in Step 1. Provide a suitable name for the program or sub-program.
3 Each activity and project should fall under a program or sub-program.
4 Review Support to Operations (STO) activities. Transfer an activity that contributes to a specific program to that program or sub-program. Otherwise, retain the activity under STO
B. Group Programs under the Organizational Outcomes (OOs) in the Category of Operations
1 Group the programs under the OOs to which they contribute.
2 Some OOs refer to clients/beneficiaries. Programs break these into more specific clients/beneficiaries.
3 Other ways of restructuring through PREXC: a. by form of intervention b. by Major Final Outputs (MFOs) or service delivered to external clients c. by function
C. Prepare Program Profile (Form A)
1 Make a Program Profile for each identified program or sub-program, if the latter is available.
2 Indicate the OO to which the program or sub-program belongs.
3 Provide the Program Objective Statement. The program objective captures the result or the change that the expenditure for a program would bring about. It should capture the essence of what a program seeks to accomplish.
4 Provide a program description with focus on the following: Narrative of Program Strategy, Monitoring and Evaluation Arrangement/Plan, Risk Management Strategy.
5 Identify performance indicators – Program performance indicators are measure of how a department /agency performs in delivering its outputs and outcomes given a particular cost. Identify at most three (3) indicators for both outcome and output.
Other issues in budgeting
Disbursement Acceleration Program (DAP)
The Aquino Administration introduced the Disbursement Acceleration Program (DAP) as a reform intervention to speed-up public spending and to boost economic growth. It is not a fund, but a mechanism to support high-impact and priority programs and projects using savings and unprogrammed funds. DAP also enabled the government to introduce greater speed, efficiency, and effectiveness in budget execution.
When the Aquino Administration assumed office in 2010, it unearthed systemic inefficiencies in public spending. These included poorly-designed and questionable projects that need to be cancelled; the prevalence of lump sum funds; implementation bottlenecks; among others. Unfortunately, its efforts to plug leakages and reform the budget execution process had the effect of slowing down spending.
From January to September of 2011, government disbursements shrank by 7.3 percent year-on-year. Underspending was most severe in the case of infrastructure, which slumped by 51.3 percent. These, alongside the global economic slowdown, pulled down gross domestic product (GDP) growth to 3.6 percent in the first three quarters of 2011, from 7.6 percent in 2010. Clearly, the government could not have afforded to nothing.
The DAP tapped the power of the president over a) the use of savings to augment deficient programs and projects; and b) the use of unprogrammed funds.
Savings are available portions or balances of items under the General Appropriations Act (GAA) which result from: a) the completion or final discontinuance or abandonment of a program, activity, or project; b) unpaid compensation for vacant or unfilled positions and leaves of absence without pay; or c) the implementation of efficiency measures that enable agencies to deliver services at lower cost. Such savings may then be used to augment funds for programs, activities, or projects which are included in the GAA (i.e. nonexistent budget items cannot be funded).
Unprogrammed funds are standby appropriations which are authorized by Congress in the annual GAA, and which may only be used when a) revenue collections exceed revenue targets; b) new revenues are collected from sources not included in the program; or c) newly-approved loans for foreign-assisted projects are secured. Such funds can be used for new programs, activities, or projects as long as these are consistent with the purposes listed in the GAA for the use of unprogrammed funds.
Previous administrations had used these authorities in the past to address urgencies they faced. Moreover, the Aquino Administration sharpened the application of such powers by prioritizing funding for programs and projects which are a) fast-moving or quick disbursing; b) urgent or priority in terms of social and economic development objectives; and c) performing well and could deliver more services with additional funds.
From the inception of DAP in October 2011 to its termination in December 2013, a total of P167.06 billion in programs and projects have been proposed to the President for funding. Of this, P144.38 billion was approved by the President and eventually released.
A total of 116 programs and projects were approved to be funded through DAP. These included an additional P1.26 billion to the Sitio Electrification Program to fast-track the electrification of 33,000 sitios; P1.6 billion for the Training-for-Work Scholarship Program benefitting a total of 149,530 enrollees; and P4.08 billion to settle unremitted GSIS premium payments of public school teachers since 1997.
With the introduction of DAP, government disbursements in the fourth quarter of 2011 grew by 32.5 percent. This pulled up full-year public spending to grow by 2.3 percent. With the sustained application of DAP, spending further grew to 14.1 percent in 2012 and 5.8 percent in 2013. The growth of infrastructure spending, in particular, improved from -28.7 percent in 2011, to 27.6 percent in 2012 and 21.6 percent in 2013.
The improved pace of public spending bolstered the growth of the country’s GDP. The World Bank in a 2012 report stated that DAP “was partially successful and contributed 1.3 percentage points to GDP in Q4 [of 2011] .” The country’s GDP growth further improved from 3.6 percent in 2011, to 6.8 percent in 2012 and 7.2 percent in 2013.
DAP provided the Aquino Administration with a strong platform to pursue major reforms that improve the pace, quality, and accountability of government spending for the long-term, including:
- GAA-as-Release Document – Beginning 2014, the GAA now serves as the release document, which means that the budgets of departments and agencies are considered released to them as soon as the GAA takes effect. This speeds up budget implementation and reduces the need to process and release special allotment release order (SAROs).
- Performance Informed Budgeting – Beginning 2014, the performance targets of all agencies are now included in the GAA alongside the budgetary allocations. This reform deepens the accountability of agencies to their committed performance targets, and enables them to better plan and design their programs in line with the government’s socioeconomic development goals.
- Electronic, Cashless and Checkless Regime – the completion of the Government Integrated Financial Management Information System by 2016 will significantly reduce inefficiencies in financial transactions brought about by manual processes. In line with this, government financial transactions will already be at least 80 percent cashless and 100 percent checkless by the end of 2014.
- Procurement Innovations – as the procurement process has been a major bottleneck to the budget execution process, the government introduced innovations such as: allowing departments and agencies to bid their projects out even before the enactment of the GAA, so that they can award contracts as early as day one of the new fiscal year; leveraging technology to enable electronic procurement; capacitating procurement staff and hiring permanent ones; among others.
With the marked improvement in the speed, quality, and accountability of government spending, DAP as a policy intervention has clearly achieved its purpose. Moreover, the roll-out of major budgeting reforms described above sustain the improved efficiency and effectiveness of budget execution in the longer-term.
Disposition and Allotment of National Internal Revenue in General
National Internal revenue collected and not applied as herein above provided or otherwise specially disposed of by law shall accrue to the National Treasury and shall be available for the general purposes of the Government, with the exception of the amounts set apart by way of allotment as provided for under Republic Act No. 7160, otherwise known as the Local Government Code of 1991.
In addition to the internal revenue allotment as provided for in the preceding paragraph, fifty percent (50%) of the national taxes collected under Sections 106, 108 and 116 of this Code in excess of the increase in collections for the immediately preceding year shall be distributed as follows:
(a) Twenty percent (20%) shall accrue to the city or municipality where such taxes are collected and shall be allocated in accordance with Section 150 of Republic Act No. 7160, otherwise known as the Local Government Code of 1991; and
(b) Eighty percent (80%) shall accrue to the National Government.
Allotment for the Commission on Audit. – One-half of one percent (1/2 of 1%) of the collections from the national internal revenue taxes not otherwise accruing to special accounts in the general fund of the national government shall accrue to the Commission on Audit as a fee for auditing services rendered to local government units, excluding maintenance, equipment, and other operating expenses as provided for in Section 21 of Presidential Decree No. 898.
The Secretary of Finance is hereby authorized to deduct from the monthly internal revenue tax collections an amount equivalent to the percentage as herein fixed, and to remit the same directly to the Commission on Audit under such rules and regulations as may be promulgated by the Secretary of Finance and the Chairman of the Commission on Audit.
Allotment for the Bureau of Internal Revenue. – An amount equivalent to five percent (5%) of the excess of actual collections of national internal revenue taxes over the collection goal shall accrue to the special fund of the Bureau of Internal Revenue and shall be treated as receipts automatically appropriated. Said amount shall be utilized as incentive bonus for revenue personnel, purchase of necessary equipment and facilities for the improvement of tax administration, as approved by the Commissioner: Provided, That the President may, upon recommendation of the Commissioner, direct that the excess be credited to a Special Account in the National Treasury to be held in the reserve available for distribution as incentive bonus in the subsequent years.
The Secretary of Finance is hereby authorized to transfer from the Treasury an amount equivalent to the percentage as herein fixed and to remit the same directly to the Bureau of Internal Revenue under such rules and regulations as may be promulgated by the Secretary of Finance.