**"*---t NG Total, Tax, and Non-Tax Revenues, i I ! I L994 199s 1996 7997 1998 1999 2000 2007 2002 2003 2004 2005 2006 2007 2008 2C09 2070 -a-Revenues +TaxRevenues 2011 -'**Non-taxRevenues ln terms of particular taxes, the decline in total ta< revenue can be traced to (i) a fall in Customs collections due to cuts in tariffs (1992-2004) and lower imports (since 2OO4\, and (ii) a fall in excise tax collections on fuels and oil. Lagging excise tax collections are due to an increase in smuggling, reduction of excise tax rates, and non-indexation to inflation. (Medalla, 2010) The 1997 Comprehensive Tax Reform Program (CTRP) appears to have contributed to deteriorating revenue performance. The CTRP aimed to make the ta< system broad-based, simple and flat on the assumption that such a tax system would improve revenue performance. (Diokno, 2008) The assumption proved unrealistic. Figure 2 shows government expenditures, disaggregated between interest and non-interest or productive expenditures. Data shows an effort to defend government spending during the period 1998-2002 at a time when total revenue was falling and interest payments were on the rise. There was a sharp decline in government spending relative to GDP starting 2003 until 2006 as revenue performance remained weak and interest payments continued to mount. Thus productive expenditures were adjusted downwards to accommodate the fall in tax revenues and the continued rise in interest payments. 3