MANILA, Philippines — Reforms including the implementation of a new comprehensive tax reform package have led to higher collection performance in the first two full years under the Duterte administration as the country marches closer to the much coveted “A” credit rating from debt watchers.
The Department of Finance (DOF) reported over the weekend the collection performance of the Bureau of Internal Revenue (BIR) averaged 96.7 percent in 2017 and 2018, higher compared to the 94.5 percent performance under the leadership of former president Benigno Simeon Aquino.
Data showed the top revenue agency’s tax effort under the previous administration did not go beyond 11 percent, but rose to 11.27 percent in 2017 and 11.26 percent in 2018 under the leadership of President Duterte.
The BIR attained a 97.35 percent collection performance with P1.78 trillion of its P1.83 trillion target in 2017 and 96.04 percent or P1.96 trillion of P2.04 trillion in 2018.
On the other hand, the collection performance of the BIR during the last full year of the previous administration deteriorated to 86.12 percent in 2015 compared to 98.31 percent in 2011, 99.23 percent in 2012, 97.05 percent in 2013, and 91.65 percent in 2014.
Despite the decline in collection performance, the tax efforts of the agency improved steadily from 9.52 percent of gross domestic product (GDP) in 2011 to 10.02 percent in 2012, 10.53 percent in 2013, 10.56 percent in 2014, and 10.82 percent in 2015.
Latest data from the Bureau of the Treasury (BTr) showed the BIR recorded a double-digit increase in collections of about 11 percent to P468.2 billion from P423.1 billion in the same quarter last year.
The finance department said tax reform has led to the strong performance of revenue collection agencies under the Duterte administration, with total revenues growing by 15.2 percent to P2.85 trillion in 2018 from P2.47 trillion in 2017.
Finance Secretary Carlos Dominguez said the country’s tax revenues went up by 14 percent to P2.56 trillion last year from P2.25 trillion in 2017.
“The 2018 tax effort of 14.7 percent of GDP is the highest in 20 years,” Dominguez said.
The DOF chief said the country’s debt-to-GDP ratio continued the downward trajectory under the Duterte administration to 41.9 percent from 42.1 percent despite the government’s ambitious infrastructure build up, with national government debt in relation to GDP.
S&P Global Ratings upgraded the country’s credit rating to BBB+ or two notches above minimum investment grade from BBB or one notch above minimum investment grade rating due to the tax reform program and higher revenue collections, which has enabled the government to finance massive infrastructure build up under the Build Build Build program.
S&P cited the country’s above-average economic growth, healthy external position, and sustainable public finance.
“The stable outlook on the rating reflects our view that the Philippine economy will maintain its momentum over the medium term, in combination with contained fiscal deficits and stable public indebtedness,” S&P said.
The upgrade recognizes the implementation of vital policy and infrastructure reforms seen to fuel robust, sustainable, and more inclusive economic growth for the Philippines.