Gov’t revenue collections seen back to prepandemic levels in 2022 | Inquirer Business
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Gov’t revenue collections seen back to prepandemic levels in 2022

Finance chief counts on better economic prospects, digitalized process
By: - Reporter / @bendeveraINQ
/ 05:30 AM August 27, 2021
Finance Secretary Carlos G. Dominguez III

Finance Secretary Carlos G. Dominguez III–DOF photo

With faster economic growth seen next year, coupled with the quick shift to digitalization, government revenue collections will revert to prepandemic levels in 2022 after a two-year slump, Finance Secretary Carlos Dominguez III said on Thursday.

During the Congressional hearing on the proposed P5.02-trillion 2022 national budget, Dominguez said total tax and nontax revenues were projected to hit P3.29 trillion next year, up from this year’s P2.88-trillion program and actual collections of P2.86 trillion amid the pandemic-induced recession in 2020. Gross domestic product (GDP) shrank by 9.6 percent last year, the worst annual postwar economic contraction. In 2019 or before the COVID-19 crisis, the tax and nontax revenue collection of the government hit a record-high P3.14 trillion.

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Faster GDP growth

The economic team expects GDP to expand by a faster 7-9 percent next year after the projected 4-5 percent growth this year.

“With improving collections mainly through digitalization, we expect to recover our prepandemic revenue levels in 2022 … From 2022 onward, we expect revenue growth to exceed that of expenditure,” Dominguez said. At present, about nine out of every 10 tax payments to the Bureau of Internal Revenue were coursed through digital channels.

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Tax revenue alone was projected to rise to P3.13 trillion next year from the targeted P2.71 trillion this year.

In 2023, total tax and nontax revenues were expected to hit P3.59 trillion and further rise to P3.99 trillion by 2024.

Dominguez said recent revenue-generating measures such as Tax Reform for Acceleration and Inclusion (TRAIN) Act, Tax Amnesty Act, as well as the two new sin tax laws passed prior to the pandemic resulted in additional revenue of P347.1 billion from 2018 to 2020.

The TRAIN Law generated P68.4 billion in incremental tax revenue in 2018, P130.7 billion in 2019 and P105.9 billion in 2020, as the pandemic hurt consumer spending last year.

Amnesty on delinquency and estate taxes, meanwhile, raised P4 billion in additional revenue in 2019 and P6 billion in 2020.

Tax reform laws help

The higher excise taxes slapped on tobacco, electronic cigarettes and vapes, as well as alcoholic drinks added P32.1 billion to last year’s tax take.

This year, the TRAIN Law was projected to generate incremental revenue amounting to P157.9 billion, which was seen to increase to P169.9 billion next year.

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Sin taxes were expected to further increase to P43.1 billion in 2021 and P52.3 billion in 2022.

However, the implementation of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act—which slashed income tax rates slapped on corporations as well as micro, small and medium enterprises (MSMEs)—will result in foregone revenue amounting to P138.2 billion this year and P118.8 billion next year.

The CREATE Law retroactively reduced big firms’ income tax to 25 percent effective July 2020, from 30 percent previously—which had been the highest in the Association of Southeast Asian Nations. It also cut to 20 percent the rate for MSMEs.

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TAGS: economic growth, Finance Secretary Carlos Dominguez III, revenue collections
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