TRAIN revenues for Jan to Sept 2018 below target

MANILA, Philippines — The Tax Reform for Acceleration and Inclusion (TRAIN) Law generated P41.9 billion in revenues for the government in the first nine months of 2018, slightly below the target, the Department of Finance (DOF) reported on Friday. 

According to the latest data from the DOF, government revenues under TRAIN showed a net gain of P41.9 billion as of end-September 2018, corresponding to 94.7 percent of the P44.3-billion target for the period.

The TRAIN collection shortfall reached P2.3 billion or 5.3 percent as against target.

“In the collection, we have succeeded in the first nine months by 94.7 percent. In any grading, it’s not so bad,” Finance Secretary Carlos Dominguez said.

Of the total net gain, P37.5 billion was contributed by the Bureau of Customs (BOC), 18.48 percent short of the P46 billion target. The Bureau of Internal Revenue (BIR) generated the remaining P4.5 billion, a positive turnout compared to the projected net loss of P1.7 billion.

According to Dominguez, the national government had foregone revenues amounting to P102.9 billion in the first nine months of 2018 due to the reduction in personal income taxes (PIT) under the TRAIN Law. This is lower than the projected loss of P108.7 billion.  

“I want to emphasize that the big number there is the reduction of PIT. The reduction in PIT in the first nine months of 2018 is P102.9 billion. That is close to P12 billion a month,” Dominguez said.

“That means to say that individuals had actually an additional P12 billion a month spending power. This TRAIN law benefited directly individuals who were earning P250,000 and below,” he said.

On the other hand, the DOF said the largest deficiencies were seen in the excise tax collections of sugar-sweetened beverages and value-added tax (VAT).  

The government was able to collect P31.2 billion in sugary drinks tax as of end-September, 28 percent below the P43.3 billion target.

“Sweetened beverage excise is short by P12.1 billion as the industry claims that no high fructose corn syrup (HFCS) has been used since Jan. 1, 2018,” the DOF said.

HFCS-sweetened beverages are taxed P12 per liter instead of the P6 per liter rate for those with caloric and non-caloric sweeteners.

 “The BIR is conducting an audit to ascertain this claim. At the same time, the FDA (Food and Drug Administration) is verifying if firms did submit applications to reformulate from HFCS to regular sugar. This is required before firms can legally market a new formulation,” the DOF added.

Moreover, VAT collections under TRAIN from January to September last year amounted to P3.6 billion, 85.5 percent below the P24.8 billion target.

“The main reason cited by the revenue agencies is that there are only three industries (power transmission, jewelries and the Central Bank) that reported importations, which is now VATable,” the DOF said.

Finance undersecretary Karl Kendrick Chua said that there was a surge in the importation of capital equipment last year, which increased input VAT claims in the BIR.

However, Chua said there is an estimated indirect VAT collection of P19.7 billion last year due to the higher spending power of households brought about by the reduction in PIT.

“So when put together, the P21.2 billion shortfall is actually much lower at just P1.5 billion once we account for the P19.7 billion additional VAT,” he said.