THE national government’s personal income tax (PIT) collections last year rose by 28.6 percent on an annual basis to P623.7 billion due to the reopening of the economy coupled by a more efficient collection system.
Bureau of Internal Revenue (BIR) data submitted to the Department of Finance showed that the national government’s PIT collections last year grew P138.5 billion from the P485.2 billion recorded in 2021.
“Collections further in 2022 as the economy fully reopened with the lifting of quarantine restrictions which further increased demand for labor,” the DOF said in a recent statement.
The DOF noted that the employment rate in December last year improved to 95.7 percent while the unemployment rate was at its lowest in more than 22 years at 4.3 percent or since April 2005.
The DOF added that better collections from self-employed and professionals (SEPs) boosted the overall earnings from PITs, offsetting the reduction in income taxes of the 99 percent of income taxpayers because of the TRAIN law.
PIT collections from SEPs last year reached P285.8 billion, 39 percent more than the P205.5 billion the government earned in 2021, based on the DOF-BIR data.
“The improved collection is attributed to the TRAIN Law provisions. In particular, the TRAIN law provides an option to SEPs to pay a simpler flat tax of eight percent on gross sales in lieu of the income and percentage tax,” the Finance department said.
“Moreover, it lessens the cost of filing by decreasing the frequency of filing and paying from eight times a year to just four times a year,” it added.
Upon the implementation of the TRAIN law in 2018, the government’s income tax collections from SEPs immediately more than doubled to P132.7 billion from P52.3 billion in 2017.
It rose to P189.4 billion in 2019 before dropping to P162.6 billion in 2020 because of Covid-19-related restrictions imposed by the government and the world that crippled economic activities.
However, income tax collections from SEPs rebounded quickly in 2021 to P205.5 billion.
Meanwhile, PIT collection from individuals receiving compensation returned to the P300-billion territory last year, five years after the government lowered and simplified income tax for most Filipino workers.
PITs of compensation earners last year reached P337.9 billion, 20.8 percent higher than the P279.7 billion collected in 2021.
The last time that the PITs from compensation earners reached the P300-billion mark in recent years was in 2017 at P317.7 billion, a year before the TRAIN law was implemented.
Under the TRAIN law, compensation earners with an annual income of not over P250,000 were exempted from paying personal income tax. At the same time, other taxpayers, except for the richest, also experienced tax cuts.
Nonetheless, DOF-BIR data showed that PITs from compensation earners have been increasing annually since 2019 and even during 2020 at the height of the Covid-19 pandemic.
DOF-BIR data also showed the amount of revenues it foregone because of the tax cuts of compensation earners: P111.7 billion in 2018, P104.2 billion in 2019, P114.1 billion in 2020, P77.1 billion in 2021 and P51.1 billion in 2022.
Corporate Income Tax collections
Meanwhile, DOF-BIR data showed that Corporate Income Tax (CIT) collections last year rebounded after three consecutive years of decline.
CIT collections by the national government in 2022 rose by 5.2 percent to P495.5 billion from P471 billion in 2021, based on the DOF-BIR data shared with the media.
“This growth in collection reflects the full reopening of the economy,” the DOF said.
Historical data showed that CIT collections were on a downward trend from 2019 to 2021—a decline attributed by DOF to the drop in withholding tax at the source because of the lowering of the tax rate from 32 percent to 15 percent as mandated by the TRAIN law.
The DOF also noted that the government incurred losses from CIT collections in 2021 and 2022 due to the CREATE law that retroactively lowered the CIT.
“As part of the economic relief and recovery package due to the pandemic,” the national government incurred losses of P51.1 billion and P59.2 billion from corporate income tax collection in 2021 and 2022, respectively, it said.
Image credits: Roy Domingo