The World Bank has challenged the Philippine government to increase tax collection by at least P200 billion yearly, saying the country needs more revenues to achieve its infrastructure-spending target over the medium term.
Karl Kendrick China, senior country economist of the World Bank, said the P200 billion was about half of the estimated yearly revenue loss of the government due to tax evasion and under-declaration of incomes.
China said ongoing efforts of the Bureau of Internal Revenue and the Department of Finance to include more people in the database of taxpayers should continue, if not strengthened further, to plug even half of the estimated revenue leakage yearly.
According to World Bank estimates, the government has been failing to collect between P400 billion and P450 billion in supposed taxes every year.
Tax collection by the BIR grew by nearly 15 percent, or by P142 billion, year-on-year to P1.066 trillion in 2012.
The bureau is tasked to increase its collection by 18 percent, or P187 billion, this year to P1.253 trillion. As of the first semester, however, it was slightly short of its target.
While the BIR’s annual tax collection was rising, China said there was still room for improvement.
The World Bank economist said it was necessary for the Philippines to substantially boost revenues because of the need to ramp up infrastructure spending.
The government has set a goal of raising its budget for infrastructure from P295 billion this year to P820 billion by 2016.
The budget earmarked for infrastructure this year is equivalent to about 2.5 percent of the projected gross domestic product (GDP), while the targeted budget for 2016 is about 5 percent of the expected GDP for that year.
The goal of raising public infrastructure spending to 5 percent of GDP is meant to match the average level of spending for public roads, bridges and other infrastructure projects in other Southeast Asian countries.
The World Bank has echoed comments of other development lending institutions that the Philippines needed to ramp up spending for infrastructure if it wanted to better compete with neighbors in terms of foreign direct investments.
The Philippines has lagged behind most Southeast Asian countries in terms of FDIs. For instance, the about $2 billion in FDIs that the Philippines cornered last year paled in comparison with the more than $20 billion that went to Indonesia.