Gov’t tax effort improves to 12.8% of GDP

MANILA, Philippines - The government’s effort to collect taxes has improved to 12.8 percent of gross domestic product (GDP) last year but still lower than the 13.3 percent goal, initial data from the Department of Finance (DOF) showed.

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.  It is computed as a percent of the country’s gross domestic product.

The increase in tax collection was due to increased efforts to catch tax cheats by the Bureau of Internal Revenue (BIR).

The BIR collected P1.057 trillion last year, up 14.5 percent from the previous year.  This was just less than one percent of the agency’s P1.066 trillion collection target for 2012.

The Bureau of Customs (BOC), on the other hand, missed its collection target in 2012 by nearly P60 billion.  The figure, however, is higher than the previous year’s collections.

For this year, the government expects to beef up its tax effort to 13.8 percent.

Finance Secretary Cesar V. Purisima said it would remain vigorous in its efforts to shore up revenues from its two main tax collection agencies as the country moves toward attaining inclusive growth and sustainable progress.

Purisima earlier said the DOF is working closely with the BIR and BOC to shore up the government’s  revenue collection effort to around 16 or 18 percent of GDP by the end of President Aquino’s term in 2016.

This target is also in line with the government’s goal to contain the budget deficit to no more than two percent of the country’s GDP from 2013 to 2016.

To achieve its goal, the Finance Department 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.