Despite ‘complex’ regulation, PHL tax system seen effective

In Photo: in this September 23 photo, fishermen alight from their boats moored at Bacoor, Cavite. Revenue generated by the government through direct and indirect taxes from citizens and entities operating within the border is also allocated for the improvement of the country’s agricultural production.

Part One

THE tax system of the Philippines have seen improvements in terms of generating revenues for the national government over the years, with data for 2016 pointing to a 4.2-percent increase in collections compared to that of collections generated in 2015.

According to data from the National Tax Research Center (NTRC), the country has generated revenues amounting to P2.206 trillion for the year 2016 alone, which saw an expansion of 4.2 percent, compared to the P2.117 trillion recorded in 2015.

Of the total, P1.991 trillion came from tax revenues, while P215.524 billion came from nontax revenues.

Abrea Consulting Group President Raymond A. Abrea pointed out that the country’s tax-collection efforts have improved year after year. Adding that the Philippines tax-effort ratio has improved to reach 10.83 percent in 2015, from the 10.02 percent in 2012.

“It has continuously increased or improved from 10.02-percent tax effort ratio in 2012, to 10.83 percent in 2015, or P1.441 trillion collection in 2015,” Abrea told the BusinessMirror. “[This] translates to 8-percent year-on-year growth, or 5.24 percent higher than P1.334 trillion in 2014.”

He explained that tax collections from the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) are from voluntary payments, with only 0.23 percent coming from delinquent accounts.

“We have to take note that 97.83 percent of these collections are voluntary payments, while only 1.94 percent is collected from audit and investigation of BIR examiners, and 0.23 percent from delinquent accounts,” he added.

Types

ITEMS that comprise the government’s tax-revenue section include direct taxes and indirect taxes. Direct taxes are made up of income and transfer taxes, among others. Indirect taxes are made up of excise tax, license and business tax and taxes from import duties.

For 2016, collections by the government reached P946.371 billion for direct taxes, with the bulk coming from income taxes amounting to P924.585 billion. The direct tax collections showed an improvement of 9.4 percent compared to the recorded direct tax collections in the previous year of P864.979 billion.

Indirect taxes comprised the bigger chunk of the total tax revenues of the government for 2016 at about P1.044 trillion, which expanded by 8.9 percent, from the P958.766 billion recorded in the previous year.

Bulk of the collections under indirect taxes came from revenues stemming from license and business taxes, which amounted to P687.081 billion. Excise taxes collected by the government for the same year amounted to P208.791 billion, import duties accounted for P48.958 billion. Other indirect taxes comprised P99.804 billion of the total.

According to Malou P. Lim, president of the Tax Management Association of the Philippines (TMAP), the average tax collections of the Philippine government have increased by at least 9.67 percent annually, from 2000 to 2015.

Projects

BASED on the 2015 annual report, the BIR collections have increased at an average of 9.67 percent annually from years 2000 to 2015, Lim told the BusinessMirror.

She added that the BIR collections in 2015 amounted to P1.42 million, or 10.83 percent of the GDP as compared to P1.33 million, or 10.56 percent of GDP in 2014.

For the taxes collected by the government that comprises the non-tax revenues section, this mainly includes fees and other charges, income from the Bureau of the Treasury (BTr), revenues from privatization and other sources.

For 2016, the government registered collections amounting to P215.524 billion, which saw a contraction of 26.5 percent, from the P293.481 billion recorded in 2015.

Of the total, the BTr income had the biggest share amounting to P101.737 billion, other sources at P73.311 billion, fees and other charges comprised P39.819 billion of the total and P657 million from privatization efforts.

According to the TMAP, some of the growth drivers that continue to support the growth in terms of the collection of taxes can be attributed to government programs, such as the BIR’s Run After Tax Evaders program, among others.

“The BIR has attributed its yearly performance to the continuing implementation of projects such as Run After Tax Evaders program, Oplan Kandado, increased collection from delinquent accounts, and intensified audit program. Additionally, an increase in the expected collections from excise taxes due to the implementation of the Sin Tax Reform act has contributed to the increase in tax collections for 2015,” she added.

Factors

MEANWHILE, the NTRC noted that the improved growth in revenues for the government over the years can be attributed to a number of reforms instituted by the different administrations, except for 2009 when the slow growth of the economy also slowed the revenue collections of the government.

“As noted, total collection has been increasing through the years except in 2009, this is the year when economic growth slowed down, which translated into lower collection. It is also noted that certain tax laws were enacted during the years under review which affected the collection performance of the BIR and the BOC,” the NTRC said.

In 2006 there was an increase in the collection of value-added tax (VAT) due to increase in its rate from 10 percent to 12 percent. Two years later, a law was also passed exempting minimum wage earners from income tax and increasing the personal and additional exemptions of individual income taxpayers.

“In view of this, collection in personal income tax declined during its full year implementation in 2009,” the NTRC said. “Also, during the same year, collection from corporate income tax declined due to lowering of the tax rate from 35 percent to 30 percent. Collections on excise tax on petroleum products also declined due to exemption of diesel, bunker fuel oil and kerosene from the said tax.”

The NTRC added that factors, such as political events, con-tributed to the country’s revenue performance during the period, with elections held in 2004, 2007, 2010 and 2013 helping propel economic growth in terms of increased election-related spending.

To be continued

Image Credits: Nonie Reyes