Tax effort improves in 5 months

MANILA, Philippines — The share of the national government’s tax collections to the country’s gross domestic product (GDP) rose to 16.33 percent in the first five months, the Department of Finance (DOF) said yesterday.

In its latest economic bulletin, the DOF said the government’s tax effort settled at 16.33 percent as of May, higher than the 15.14 percent recorded in the same period last year.

“Tax effort rose by an unprecedented 1.19 percentage points from 15.14 percent to 16.33 percent, the highest first five months’ tax effort ever achieved,” the DOF said.

Overall revenue effort – which also includes non-tax collections – also grew to 18.17 percent from 16.74 percent last year.

In the first five months,  the government’s tax revenue grew 18.4 percent to P1.07 trillion from last year’s level of P901 billion.

Of the amount, P827.7 billion was collected by the Bureau of Internal Revenue (BIR), while the remaining P229.4 billion was contributed by the Bureau of Customs (BOC).

 The DOF attributed the increase in government revenue to the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, as well as the tax administration reforms made by revenue agencies.

On the other hand, the DOF said expenditure effort from January to May settled at 20.29 percent, 2.48 percentage points higher than the 17.81 percent recorded a year ago.

As of end-May, government disbursements increased by 25 percent to P1.33 trillion from P1.06 trillion, mainly due to the 40 percent expansion in capital outlays, the agency said.

As a result, the national government incurred a fiscal deficit of P138.7 billion as of May 31, equivalent to 2.12 percent of GDP. This was below the three percent fiscal deficit target for the whole year.

Economic expansion accelerated to 6.8 percent in the first quarter compared to the 6.6 percent recorded in the same period in 2017.

According to the DOF, the faster growth was driven by the expansion of the government’s fiscal space as a result of the TRAIN and tax administration reforms, which in turn boosted investments.

The DOF said public construction expanded by more than 25 percent in the first quarter, boosting GDP growth by 0.4 percentage point, while government consumption rose 13.6 percent, contributing 1.4 percentage points more to growth.

“Strong macroeconomic fundamentals backed by tax reforms and the Build Build Build program will continue to boost economic growth closer to the optimum seven to eight percent level as the competitiveness of the economy rises and more jobs are created,” the DOF said.