MANILA, Philippines – Finance Secretary Cesar Purisima said yesterday the country remains on track to meeting its revenue collection targets following a strong economic growth in the first quarter.
Bucking a worldwide economic slowdown, the Philippine economy expanded by 7.8 percent in the first quarter of the year – the fastest pace since 2010 – mainly driven by growth in the construction and manufacturing industries.
It outpaced Asian powerhouse China, where the economy surprisingly grew by only 7.7 percent.
“We are still on track to meet our goals for the tax effort and revenue effort, especially given our high first-quarter growth. We note that in the past, tax effort has gotten a significant boost from the first quarter of the year to the second, and we anticipate the same given our very successful tax collections in April this year,” Purisima said.
Tax effort is an index measure of how well a country is doing in terms of tax collection relative to what could be reasonably expected given its economic potential.
The Bureau of Internal Revenue, the government’s main tax collection agency, posted collections amounting to 9.2 percent of GDP while the Bureau of Customs’ collections stood (BIR), at 2.6 percent of GDP.
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The Bureau of Treasury, meanwhile, recorded collections of 0.9 percent of GDP while other offices collected 0.1 percent of GDP.
The government aims to increase the country’s tax effort to 16 percent by the end of Pres. Aquino’s term in 2016 and 18 percent on revenue wide basis.
For this year, the government expects to shore up its tax effort to 13.5 percent from 12.8 percent of GDP in 2012. Revenue effort, on the other hand, is targeted at 14.7 percent.
In 2012, tax effort increased by 1.6 percent between the first quarter and second quarter. In April this year, the BIR collected P149 billion, up 28 percent year-on-year.
Purisima said the government is committed to increasing tax revenue with measures to broaden the revenue base and further improve tax enforcement.
The move is also in line with the government’s goal to limit the budget deficit to no more than two percent of the country’s GDP from 2013 to 2016.
To achieve its goal, the Department of Finance (DOF) is looking to revisit taxes imposed on self-employed individuals as well as estates of the deceased.
The DOF wants to increase the average self employment tax to P200,00 from the existing P7,000. This should translate to at least P300 billion in additional revenue for the government, roughly three percent of GDP.
Aside from this, the government is considering raising estate tax collections to P50 billion annually amid a resurgent property market and record low interest rate regime which have jacked up property values.
The estate tax is a tax levied on the privilege of transferring property upon the death of the owner. It is not a property tax.
The estate tax accounts for only less than one percent of the BIR’s total revenues.