Q1 tax collection declines

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Govt blames low oil prices

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THE national government’s tax collection as a percentage of the gross domestic product (GDP), or the tax-to-GDP ratio, declined to 13 percent of GDP in the first quarter of 2016 against 13.29 percent in the same period in 2015, the Department of Finance (DOF) said on Tuesday.

An analyst said the lower tax-to-GDP ratio could be traced to both the higher GDP growth during the period and the lower value of oil imports.

In its latest economic bulletin, the DOF attributed the lower tax effort to the continued downward plunge of oil revenues.

“However, netting out the effects of the oil price decline and rice, tax effort rose by a modest 0.02 percentage point,” it stated.

For his part, Nicholas Antonio Mapa, Bank of the Philippine Islands associate economist, said the lower ratio could very well be tied to the fact that GDP grew much faster than the growth in the tax effort, which he said has seen a phenomenal improvement at least in terms of the Bureau of Internal Revenue (BIR).

GDP in the first quarter grew 6.9 percent, while in absolute terms tax revenue rose 5.2 percent to P424.7 billion from the year-earlier level of P403.7 billion.

The DOF said the BIR accounted for bulk of the tax collected in the three months through end-March as its collections increased by 7.5 percent to P330.2 billion from P307.1 billion in the comparative 2015 period.

“Although the recent efforts of [BIR] Commissioner [Kim] Henares have drawn the ire of almost every private citizen and corporate, we cannot help but point to her leadership as one of the reasons for the improvement in collection,” Mapa said.

The BPI economist said the second reason is the lower taxes collected by Bureau of Customs (BOC) on the back of lower value of petroleum imports during the period.

The DOF data showed that the BOC collected P90.5 billion, or a 1.9 percent decrease from the P92.3 billion generated a year earlier “as oil taxes dropped due to 41.5 percent decline in international prices.”

Tax reform ahead?

“Incoming President [-elect Rodrigo] Duterte has indicated he would like to see some form of tax reform but we are unsure as to what he would like to push for. Duterte has been known to say many things and take them back the next day and so the only thing we can be sure of is that he would like to improve the tax system,” Mapa said.

Mapa also cited the plan of the new administration to increase taxes on sin products and non-essentials, but added that the government may see a lower tax take from this sector given Duterte’s proposed liquor and smoking bans.

He also noted of the likelihood of revisiting the current income tax brackets, mulling higher tax rates for high-income earners and lower rates for lower incomes in a bid to push equity.

“Although all seem to be in line with his ‘pro equity’ push we’ve yet to see anything released that is concrete, so we’ll have to wait until things are actually instituted,” he concluded.

Lower dividends

Meanwhile, the DOF said other agencies accounted for a further 5-percent decrease in collections “due to prompt remittance of dividends last year.”

The Finance department noted that in the January to March period, dividend income reached P8.6 billion from P19.5 billion last year.

The DOF said overall revenue collected rose 1.8 percent to P479 billion in the three-month period while expenditures expanded faster by 17.3 percent to P591.5 billion.

As a result, the national government’s deficit in the period stood at the equivalent of 3.44 percent of GDP, exceeding the benchmark of 2 percent, and wider than the 1.10 percent deficit posted in the 2015 corresponding period.

On the other hand, government debt in relation to GDP dropped to 44.3 percent at end-March from 44.7 percent a year earlier, the DOF said, tracing the drop to debt management measures.

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