MANILA, Philippines — Despite weak economic activity, the Bureau of Internal Revenue (BIR) and Customs still exceeded their tempered collection targets in July, in what Finance Secretary Carlos Dominguez III counted as among the signs of economic recovery following a pandemic-induced recession.
At a online press briefing, Dominguez said BIR, which accounts for around 80% of tax revenues, generated P126.72 billion last month, 2.08% higher than P124.14-billion collection goal.
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"The major tax gains last month were seen in both excise and value-added taxes, signs that consumer spending is starting to pick up," the finance chief said.
Meanwhile, Customs collected P50.07 billion in July, beating its goal of generating P47.67 billion revenues by 5.03% "due to higher import volumes," Dominguez reported.
"This follows above-target performance in June, and signals rising economic activity," he added.
Government data released Thursday showed the economy officially entered recession for the first time in 29 years in the second quarter, shrinking by 16.5% year-on-year, the worst reading in a data series going back to 1981. In the first half, the economy sagged by 9%.
The record-breaking slump prompted the government to rethink their growth ambitions and macroeconomic assumptions, including on the revenue front.
On Thursday, the interagency Development Budget Coordination Committee (DBCC) projected revenue collection to sag to P2.52 trillion this year, all while government programs against the pandemic are expected to supercharge spending to P4.34 trillion.
Lower revenues would widen the budget deficit to 9.6% of the country's gross domestic product (GDP), larger than the DBCC's previous assumption of 8.5%.
Higher deficits mean bigger debts poised to hit “around 50%” of GDP, which if realized will be the widest since 2010. According to DBCC, they are confident that the government’s liabilities "will be kept at a sustainable and responsible level, within the 60 percent internationally-recommended debt threshold, by 2022."
"While we had endured other difficult episodes in the past, what makes this crisis different is how prepared our fiscal position is now for a challenge of this scale. In previous years, emergency spending and urgent borrowing might have been very difficult to carry out," Dominguez said.
"We are beginning to see the light at the end of the tunnel," he added.