PH tax collection could suffer shortness of breath as result of COVID-19 epidemic in China

The Philippines’ two biggest revenue agencies see tough times ahead the COVID-19 outbreak already took its toll not only on shipments of imported goods, especially from China, but also on sales of big taxpaying firms.

During the Bureau of Internal Revenue’s (BIR) 2020 tax campaign kickoff last Tuesday (Feb. 18), Commissioner Caesar R. Dulay said this year may be “challenging in terms of revenue collections.”

Internal Revenue Deputy Commissioner Arnel Guballa last week said companies belonging to the BIR’s large taxpayers service had already sent feelers warning the agency to “don’t expect ‘good’ voluntary payments in the coming month.”

A number of firms had told the BIR that their businesses in general and consumer demand in particular slowed due to Taal’s eruption and the spread of COVID-19 in and out of China, Guballa had said.

Companies belonging to the large taxpayers category were supposed to contribute the bulk or P1.67 trillion out of the BIR’s P2.58-trillion collection target for 2020.

Dulay was nonetheless confident that the BIR will achieve or even exceed this year’s goal.

Finance Secretary Carlos G. Dominguez III said “the BIR has all the tools, the manpower and the systems to collect that amount.”

“Those taxes are to be spent for infrastructure, healthcare, education. We are serious in funding all of that,” Dominguez said.

Dominguez, however, acknowledged: “I understand that retail sales are down—I don’t know exactly by how much—but because people are avoiding crowds” to avoid COVID-19 infection.

“Overall, it’s good for the country because you know we have not had any person-to-person transmission here,” Dominguez said.

“I think that the Department of Health has done a very good job,” he added.

“And this drop in sales and revenues for us is, I believe, just temporary until this coronavirus contagion is defeated,” Dominguez said.

Dominguez, though, said the number of containers of imported goods from China—the Philippines’ top source of imports—fell 62.15 percent to 11,050 TEUs last Feb. 1-18 from 29,195 TEUs during the same period last year.

While inbound shipments from China rose 8.24 percent to 66,828 TEUs last January, the number of containers from China during the first one-and-a-half months declined 14.36 percent to a total of 77,878 TEUs from 90,936 TEUs in 2019, Dominguez said, citing the latest Bureau of Customs (BOC) data.

“So we’re concerned, but we believe that the slack [from Chinese imports] will be taken up in other markets,” Dominguez said.

To reduce the impact of COVID-19 on the economy, Dominguez said the government will fast-track spending on public goods and services to offset slower private consumption and external trade.

Citing a preliminary report from National Treasurer Rosalia V. de Leon, Dominguez noted that public expenditures in the first one-and-a-half months rose 25 percent year-on-year.

Dominguez added that “on the monetary side, we have been discussing with [Bangko Sentral ng Pilipinas Governor] Benjamin Diokno to prepare for real, if this thing gets worse,” but declined to say if he will recommend another interest rate cut.

In a report on Wednesday (Feb. 19) titled “Credit Conditions – Asia: Risks to credit environment are rising as growth outlook slows,” debt watcher Moody’s Investors Service said “some economies, such as the Philippines and Thailand, have more fiscal space to respond to shocks.”

Edited by TSB