New levies, amnesty push tax effort to 22-year peak

New levies, amnesty push tax effort to 22-year peak

MANILA, Philippines (Updated 3:19 p.m.) —The government’s tax effort reached a milestone last year, hitting its highest level since Philippine tax laws were last overhauled, driven by higher revenues generated from new tax legislation.

In his speech before the Bureau of Internal Revenue last Tuesday, a copy of which was sent to reporters on Wednesday, Finance Secretary Carlos Dominguez III said the tax effort hit 15.1%, the highest level in 22 years or since 1997 when the figure hit 15.3%.

At the time, several provisions of the National Internal Revenue Code were amended, including personal income and fuel levies that were credited for an uptick in revenue collections.

Tax effort measures the government’s ability to raise revenues as the economy expands. A higher figure means taxmen have been efficient in collecting what is due of the state in an environment where more economic resources are being generated.

The record-breaking figure was notched despite a slowdown in economic output last year, falling to an eight-year low of 5.9%. Dominguez credited the BIR, the agency responsible for more than 80% of tax revenues, for the achievement.

“Clearly, the BIR is the spear point in our nation’s progress,” he said.

“So, as you go out there, building partnerships with our taxpayers in the framework of a dynamic modern tax system, remember that you are not just producing revenues. You are creating a better future for this country,” he added.

According to Finance department data, BIR collected P2.18 trillion, up 11.3% year-on-year, but falling below the agency’s P2.32-trillion goal.

Last year’s BIR collections were aided by the Duterte administration’s Tax Reform for Acceleration and Inclusion (TRAIN) law, which was enacted in 2018, but stipulated annual adjustments in tax rates in select products like fuel and liquor.

Apart from a new tranche in oil, cigarette and alcohol levies under TRAIN that took effect at the start of the year, lawmakers also enacted a separate measure that hiked tobacco taxes anew in the middle of the year.

A tax amnesty for delinquent taxpayers were also started last April to encourage people with arrears to settle their dues. 

For this year, BIR is tasked to collect P2.5 trillion, a target that already come under threat from the Coronavirus Disease-19 which has forced the stoppage of many tourist activities and businesses, which in turn may result in lower tax collections.

On the flip side, BIR collections would be aided by fresh tax increases that help generate higher revenues. Apart from a new round of fuel and car excise tax hikes under TRAIN, separate tax measures on tobacco, alcohol and e-cigarettes would benefit the agency. 

“I trust that the bureau will once more overshoot its targets...I also expect you to intensify your efforts against tax evaders and wide the taxpayer base,” Dominguez said.

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