which available evidence suggests is substantial (the Transparency International 1998 Perceptions Index ranked the Philippines at 55 out of 85 countries, where rank I is the least corrupt country)5 In fact, till 1997 the highest tax-GDP ratio achieved (which was in 1997 itself) was 16.8%, making the achievement of a 19% tax effort by 2001 open to question. Though the SAR recognized that increased revenues are transfers from the private sector no attempt to take this into account in calculations was made. One way around the problem of estimating the (shadow) premium parameter of private to public transfers is to find the break even social premium as illustrated below. On the other hand, certain other assumptions are pessimistic. The increase in administration costs (in this case taken as equal to project outlays), which translates directly (absent distributional effects) into an added social burden, are overestimated. As the previous paragraph reports, reduced taxpayer compliance costs as well as reduced current and future administrative costs would have been likely, offsetting some of the direct administrativ **e** xpenditure increase.

As it stands, the projecs net benefit are probably positive (though lower than the SAR suggests) even if some of the over-optimism is corrected. For example, if (a) actual tax GDP ratios are used up to 1997 and projected to increase thereafter at the average increase during 1995- 1997 (2.4%), (b) if additional revenues due to the project were only 50% of the growth achieved (the rest being attributable to other reforms such as the recent VAT refonn), (c) no downward adjustment is made to costs, and (d) the discount rate is taken to be as high as 20%, the project breaks even provided the premium of each additional dollar transferred to the public sector is 0.05 pesos (a 5% premium). At a 10% premium, the net present value of the project ranges _from_ 1.5 billion to 3 billion pesos (and benefit-cost ratios between 3 and 4.2, IRR of 50.3%/o) for the 10% to 20% range of discount rates in the SAR.

i However, project net benefits could easily turn negative despite revenue increases, if additional transfers to the government have a lower premium, which could arise if, say, further public sector expansion had limited benefits so that, instead of increasing revenue, downsizing government was needed. On the other hand, if substantial cost saving were to be made possible by a revenue neutral project, net benefits would be expected to be positive.

'Philippines Tax Computerization, May, 1993, Project ID. PH-P&4599. - UNDP (1992), Venecia (1992) and Manasan (1988) full eitations are not given in the SAR I The cash flow was taken over 9 years rather than the 10 years claimed in the SAR.

4 The numerical counterpart of "gradually" is not reported in the SAR 5 Infact, the tax GDP ratio averaged 16.4% during 1993- 1997, reaching 17% in 1997. This implies that the incremental effort in 1997 was about 20% lower than assumed in the appraisal.

# **9. Evaluation Of Project Outcomes**

_The evaluation of project outcomes and impact in post-project documents is documented here. This is followed by an assessment of the basis of assessment of project outcomes and the extent to which lessons for future operations are derived The section closes with a discussion and an example of a possible strategy to increase the value of post-project evaluation for future operations._ As discussed earlier, only a handful of the projects examined in this review have closed and have undergone outcome evaluation. Boxes 10 and 11 respectively present case studies of a highly satisfactory and a highly unsatisfactory project.

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