End-Sept tax take rose 9.3% to P2.03T
Tax collection rose 9.3 percent year-on-year to P2.03 trillion as of end-September, signaling economic recovery and paving the way for fiscal consolidation to narrow the ballooning fiscal deficit and slow down debt accumulation brought about by more government spending to fight the prolonged pandemic.
Finance Secretary Carlos Dominguez III on Friday said the Bureau of Internal Revenue’s (BIR) tax take from January to September rose 6.9 percent year-on-year to P1.54 trillion.
The Bureau of Customs’ (BOC) collections of import duties and other taxes during the first nine months climbed 18 percent year-on-year to P469.8 billion, Dominguez noted.
Dominguez told a forum organized by the United Nations Economic and Social Commission for Asia and the Pacific (Unescap) that the Philippine government was “confident that the elevated debt and deficit level is a temporary condition, and we can quickly return to fiscal consolidation.
Last month, the Development Budget Coordination Committee (DBCC) said the government next year will start to narrow the budget deficit to pre-pandemic levels alongside expectations of faster economic growth and increased revenue take.
From this year’s widest-ever budget deficit of P1.86 trillion (equivalent to 9.3 percent of gross domestic product), the gap will gradually decline to P1.67 trillion (7.5 percent of GDP) next year, P1.43 trillion (5.9 percent of GDP) in 2023, and P1.29 trillion (4.9 percent of GDP) in 2024, per DBCC projections.
Last year, the national government bloated its fiscal deficit to P1.37 trillion or 7.6 percent of GDP due to higher spending requirements for COVID-19 response while revenue collection weakened amid the pandemic-induced economic slump.
“Because of all the unplanned spending for COVID-19 response and the drop in our revenues due to our lockdowns, we had to deal with a temporary but controlled expansion of our deficit-to-GDP ratio last year. But we had set out a clear strategy for financing our deficit: we prioritized domestic borrowings, followed by official development assistance (ODA), and the international capital markets. We determined this plan as the most prudent approach in ensuring sustainability in our debt service,” Dominguez said.
Dominguez had said that the Department of Finance (DOF) was already working on a “playbook” of fiscal strategies — including possibly new or higher taxes — which the next administration may implement to raise more revenues and revert the budget deficit to about 3 percent of GDP.
The slower revenues amid the pandemic also forced the government to borrow more through concessional loans extended by multilateral banks and bilateral development partners as well as bond issuances in domestic and offshore commercial debt markets.
This jacked up the Philippines’ debt-to-GDP, which reflected an economy’s ability to repay its obligations, to 54.6 percent in 2020 from a record-low 39.6 percent in 2019.
Since the debt stock grew faster than the economy during the first half, debt-to-GDP stood at 60.4 percent as of June — slightly above the 60-percent threshold which debt watchers considered as a manageable level among emerging markets.
Debt-to-GDP had been projected to end 2021 at a 16-year high of 59.1 percent, as the national government’s outstanding obligations will hit a record P11.73 trillion by yearend.
Dominguez said the Philippines remained prudent in spending scarce resources as the government “took into account what the country can spend quickly and effectively.”
“Instead of throwing money at the crisis, the government adopted the more prudent strategy of expanding lending to pandemic-hit enterprises by adding more capital to our government banks. Instead of passing funds to what tend to be less efficient government programs, we are leaving money in the private sector’s hands to revitalize their businesses through a hefty reduction in corporate income tax rates,” Dominguez said, referring to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which slashed the income tax rates slapped on large corporations as well as micro, small and medium enterprises (MSMEs).
The DBCC had estimated the CREATE Law will shed P118.8 billion from tax collections next year; P115 billion in 2023; and P106.5 billion in 2024. This year’s foregone revenues from CREATE were estimated to reach P138.2 billion.
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