Despite strong GDP growth Tax collection slows in Q1

MANILA, Philippines - The government’s revenue and tax efforts went down in the first quarter from the same period last year as stronger economic expansion failed to translate to better collections.

Total revenues accounted for 14.65 percent of gross domestic product (GDP) from January to March, down from 15.5 percent last year, data from the Department of Finance showed.

The target for the year is 18.1 percent.

Broken down, taxes were equivalent to 13 percent, dipping from 13.3 percent in the same period. The 2016 goal is 17 percent of GDP.

Theoretically, more revenues should be collected as the economy creates more products and services as gauged by GDP. Lower ratios meant the government generated less income.

This was despite GDP growth accelerating to 6.9 percent in the first three months from five percent previously.

“Tax collection was a bit slower than targeted. This was the same as (Thursday’s report) showing revenue slowdown,” said Alvin Ang, economist at Ateneo de Manila University.

Revenues only grew two percent as of March, with the Bureau of Internal Revenue (BIR), the government’s main revenue agency, the only one to have increased collections. 

BIR’s total haul cornered 10.1 percent of GDP, similar to last year’s level. The target for the year is 13.6 percent, which Internal Revenue Commissioner Kim Henares said is a “stretched goal.”

“There is a lag in tax collections by about one quarter. So those recorded in the first quarter were actually our collections in the fourth quarter of 2015,” Henares said.

“They always give us a high target even if I don’t think it is reachable,” she added.

The Bureau of Customs, meanwhile, posted a 2.77-percent effort, data showed. This was down from three percent and compares with its 3.3-percent target for the year. 

BIR and Customs collectively account for more than 90 percent of government revenues.

“Trade was not necessarily weak in the first quarter. Customs revenues were probably down because of low commodity prices such as that of oil,” Ang said in an e-mail.