The Department of Finance has tasked the Bureau of Internal Revenue to zero in on value-added tax leakages, saying the government’s VAT collection was far too small compared with the significantly growing consumption of Filipinos.
Since consumption is a key growth driver of the Philippine economy, Finance Secretary Cesar Purisima said the growth in VAT collection should be close to the growth of the country’s economy.
He said that the tax bureau’s VAT collection grew by 19 percent from 2009 to 2012, much slower compared with the increase in the economy’s GDP in nominal terms. Documents from the finance department showed that VAT collection amounted to P229.86 billion last year.
Data from the National Statistical Coordination Board showed that the country’s GDP in nominal terms, which is not adjusted for the effects of inflation, grew nearly 32 percent to P10.57 trillion last year.
Purisima said the difference between the rate of increase in VAT collection and the rate of expansion of the economy indicated that the government was losing a substantial amount in potential revenue collection.
VAT is a tax on consumption and carries a rate of 12 percent of the prices of goods and services.
“There has been a substantial improvement in tax collection over the past few years, but we have a long way to go in terms of getting to where we should be as far as tax collection is concerned. One area to focus on is VAT,” Purisima told reporters Friday at the sidelines of the BIR’s 109th anniversary celebration.
In his speech during the event, the finance chief challenged employees of the BIR to implement measures that would help plug leakages in VAT collection. “We can collect much more. After all, VAT is 12 percent of gross [sales] so I would like you to focus on VAT,” he said.