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Philippines Economy News

Tax take as share of GDP declines in 9 months

tax take as share of gdp declines in 9 months - Tax take as share of GDP declines in 9 months

THE SHARE of tax collections to economic output — known as “tax effort” — fell to 14.5% in the nine months to September compared to the 14.9% posted a year earlier, due to the weakening of the economy as a result of the pandemic, the Department of Finance (DoF) said in an economic bulletin.

In a statement over the weekend, the DoF said the Bureau of Internal Revenue reported a 11.3% tax effort while the Bureau of Customs was at 3.1%, down by 0.1 and 0.3 percentage points from a year earlier, respectively.

Taxes collected by the government dropped 11% from a year earlier during the nine months to P2.143 trillion amid dampened consumer spending and business closures.

The overall revenue effort rose slightly to record levels as government revenue from non-tax sources increased 21.6% to P288.4 billion. The increased income was generated by larger than usual dividends remitted by state-owned firms, who had been urged by the government to provide the funds ahead of schedule for the pandemic containment effort.

Expenditures increased 15.1% year on year to P3.023 trillion in the nine months as pandemic expenses mounted.

“On the other hand, prudent debt management has led to P15 billion in savings from interest payments (at) P313 billion, 4.6% below the original program of P328 billion for the first three quarters,” it said in the bulletin.

As a share of gross domestic product (GDP), expenditure effort rose to 23.6% from 18.8% a year earlier.

“The fiscal reforms adopted by the Duterte administration, including tax reforms and the utilization of idle savings in the public sector, boosted the revenue effort to the highest first three quarters’ level in history. These reforms have made the country one of the six strongest emerging economies to meet the challenges of the pandemic,” the DoF said.

The government has so far passed laws that hiked excise taxes on tobacco and alcohol products and lowered personal income tax, and an estate tax amnesty. It has suffered setbacks in the area of fuel and other goods and services as fuel use and consumption slumped due to the economic crisis.

“The country should continue to adopt fiscal reforms, particularly tax reforms still pending in Congress, to sustain these fiscal gains,” it added.

Pending tax bills include a measure that seeks to lower the corporate income tax to 25% this year from 30% currently while overhauling the tax incentive system; and tweaks to the property valuation system and the taxation of passive income. — Beatrice M. Laforga

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