The recent tax measures introduced to shore up government revenues took a hit from the pandemic-induced recession, resulting in a lower take thus far, the Development Budget Coordination Committee (DBCC) said.
In an Oct. 15 report, the DBCC said the “prolonged lockdown has led to distortions in the market as economic activity from the businesses and services sectors has been abruptly curtailed, including a liquor ban and restrictions on the movement of goods, among others.”
It said these factors dampened both consumer demand and the overall economic atmosphere and should “translate into a reduced revenue base for the remaining months of 2020 and therefore [a] reduced revenue collection.”
The DBCC noted the incremental revenues to be generated from the new or higher excise taxes imposed under the Tax Reform for Acceleration and Inclusion Act (Train) combined with the “sin” tax hikes would only generate P25.7 billion this year, P62.7 billion next year and P82.7 billion in 2022.
These numbers, however, take into account the net effect of the Corporate Recovery and Tax Incentives for Enterprises (Create) bill, which if passed would have a retroactive effect beginning July 2020. Create will slash firms’ income tax rate to 25 percent from 30 percent previously.
Actual collections from Train in 2019—sans the ‘sin’ tax which only began in January this year—totaled P130.7 billion.
“Estimates for legislated tax policy measures, such as Train and sin taxes, have been revised downward to account for the impact of the enhanced community quarantine on consumer demand, particularly for excisable products,” the DBCC said, referring to the stringent lockdown from mid-March to May that halted 75 percent of the economy.
In a preliminary report last Sept. 30, the DBCC said additional revenues generated from the implementation of Train, amnesty on delinquencies and estate taxes as well as the new sin tax laws from January to June—or prior to the Create bill—amounted to P50.9 billion, down 12.6 percent from P58.3 billion during the first six months of last year.
The actual end-June take nonetheless exceeded the downscaled goal of P24.3 billion for these legislated tax measures.
In the case of the Train Act alone, the six-month net take reached P32.1 billion, down 44.7 percent year-on-year, albeit exceeding the scaled down target of P18.5 billion.
“The gains against the revised estimates during the first half of 2020 were from personal income tax, imported petroleum excise tax, sweetened beverage excise tax, tobacco excise tax, and mining excise tax,” the DBCC said.
Poor motor vehicle sales amid the lockdown also slashed automobile excise tax collections by 64.7 percent year-on-year. The total petroleum excise tax take, on the other hand, was down by 5.3 percent during the six-month period.
“The limited operations of public and private transportation and the manufacturing sector during quarantines and travel lockdowns restricted economic movement and led to a reduction in the domestic demand for petroleum products,” the DBCC noted.
The higher “sin” taxes on cigarettes, e-cigarettes and alcohol raised P17.2 billion in fresh revenues as of June, almost three times bigger than the P5.8-billion program.
However, “while additional revenues from alcohol and tobacco excise collections exceeded estimates for the first half of 2020, total excise tax collections for these sin products suffered reductions when compared with the same period last year,” the DBCC said.