Tax revenue targets breached in H1 – DOF

MANILA, Philippines - The government breached its revenue and tax effort targets in the first six months as good fiscal performance matched conservative assumptions of the new government.

From January to June, revenues accounted for 16.01 percent of gross domestic product (GDP), higher than the 15.5-percent goal for the year, Department of Finance (DOF) data showed.

Broken down, taxes were equivalent to 14.28 percent, also falling above the target of 14.1 percent.

Revenue and tax efforts measure the efficiency of government collection as the economy expands. Theoretically, more revenues should be generated as GDP grows faster.

“Strong fiscal fundamentals will continue to underpin robust economic growth,” Finance Undersecretary Gil Beltran said yesterday.

GDP, the sum of all products and services created in an economy, expanded 6.9 percent in the first half, falling way above the tempered six to seven-percent goal this year.

The Duterte administration lowered growth and budget targets when it took over, opting to be conservative on its assumptions as it adjusts on its new position and weak external environment.

Emilio Neri Jr., lead economist at Bank of the Philippine Islands, finds this a good reason.

“I think the new administration is managing expectations about the possibility of a slowdown in revenues given the leadership transition,” Neri said in an e-mail.

“The first half results were not really discouraging since the old targets were also too high and ambitious,” he added.

In the previous administration, revenue effort was targeted at 18.1 percent, with tax-to-GDP alone at 17 percent. Last year, both ended up at 15.9 and 13.7 percent, respectively.

Broken down, collections by the Bureau of Internal Revenue (BIR) accounted for 11.4 percent as of June, above the 11.2-percent target. The Bureau of Customs’ matched its yearly goal at 2.8 percent.

In 2015, BIR effort reached 10.1 percent, while Customs was at 2.8 percent, data showed.

“The downward revisions (to targets) were reasonable. The question, however, is if they can deliver later in the year,” Neri said.

The Duterte administration is planning a tax reform program effective next year that will see income taxes lowered, while oil excise levies rise and new ones in sugar drinks imposed.

The DOF said the package, to be submitted to Congress next month, would be revenue positive to generate a net of P41 billion.