The government is losing an amount equivalent to 4 percent of the country’s gross domestic product (GDP) every year due to tax evasion, according to National Treasurer Rosalia de Leon.
She said that while the government’s fiscal health has improved dramatically since the early 2000s, there was still room to further boost revenues by addressing tax evasion.
“According to our estimates, we lose about 4 percent of GDP to tax evasion of self-employed professionals, compensation earners and corporations,” De Leon said in a bond forum organized by Bloomberg last Friday.
Based on latest official GDP figures, the losses from tax evasion amounted to at least P360 billion.
While the government has reduced its debt burden over the years, it could further trim the ratio of its outstanding debts to GDP through efforts to curb tax evasion.
“To plug this leakage, the government plans to mobilize its full bureaucracy to help the BIR (Bureau of Internal Revenue) crack down on delinquents,” she said.
De Leon cited government data showing that collection of estate taxes averaged at only P1 billion a year over the past three years.
Finance Secretary Cesar Purisima had earlier highlighted the problem on rampant tax evasion among self-employed professionals.
During the recent induction ceremony for certified public accountants, he said there were very few accountants who were registered taxpayers. Purisima added that many of those registered were believed to be underdeclaring their incomes.
Purisima made an appeal to the CPAs to work with the government in addressing revenue leakages by paying the right taxes and by refusing to sell their signatures to tax-cheating corporations.
Government data showed that taxes collected by the BIR reached P504.95 billion in the first five months of the year, up nearly 15 percent from P439.82 billion in the same period last year. This was, however, short of the agency’s target for the period.
Despite the double-digit growth, the government said it believed that tax collection could improve more if individuals and enterprises would religiously pay taxes.
Meantime, De Leon said the Bureau of the Treasury would continue implementing programs meant to help keep the cost of government borrowings low. She said the Treasury would continue looking for and taking advantage of debt refinancing.
The government’s outstanding debts of about P5.4 trillion are estimated to be below 50 percent of GDP.
The debt-to-GDP ratio has continued to decline since hitting a peak of 74 percent in 2004, thanks to improving revenue collections that tempered the need for borrowings.
But finance officials said they expected the ratio to further improve as intensified efforts against tax evasion get a big push.