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MANILA, Philippines—The Duterte administration’s comprehensive tax reform program raised additional revenues totaling P575.8 billion from 2018 to 2021, but the prolonged COVID-19 pandemic shed three times more from government collections, the Department of Finance (DOF) said.
The Tax Reform for Acceleration and Inclusion (TRAIN) Act, a couple of tax amnesty programs, and the string of “sin” tax laws implemented since 2018 raised a net of P68.4 billion in incremental revenues that year; P134.7 billion in 2019; P144 billion in 2020; and P228.6 billion last year, the DOF’s 2021 annual report published on May 3 showed.
“Incremental revenues from these measures are earmarked to fund the ‘Build, Build, Build’ and the universal health care (UHC) programs,” the DOF said.
From 2018 to 2021, the new or higher taxes slapped on consumption to compensate for the rationalized personal income tax rates under the TRAIN law generated P476.1 billion in additional collections.
The two tax amnesty programs on delinquencies and estate tax from 2019 to 2021 collected a total of P14.6 billion.
The sustained annual increases in excise taxes slapped on cigarettes, e-cigarettes and alcoholic drinks from 2020 to 2021, meanwhile, allowed the government to collect an additional P85 billion from so-called sin products.
“Excise taxes on sin products will continue to increase every year from 2022 onwards, as provided under the new sin tax laws, Republic Act (RA) Nos. 11346 and 11467,” the DOF noted.
“It is also under this administration that excise taxes on sin products were increased three times. This administration is also the first to impose excise taxes on heated tobacco products and vapor products, with distinction between salt nicotine and freebase vapor products. These highlight what a galvanized political will and decisive action can do to protect the people from the consumption of products that are detrimental to their health,” the DOF said.
However, the DOF’s estimates showed that the tougher times wrought by COVID-19 resulted in a total of P1.71 trillion in foregone revenues since 2020 — P785.6 billion during the Philippines’ worst annual recession post-war, on top of P928.4 billion last year amid prolonged pandemic restrictions.
When combined tax and non-tax revenue collections were measured as a share of gross domestic product (GDP), the DOF said that “the revenue effort of 15.6 percent over the five-year period since the Duterte administration took over in 2016 is the highest in over two decades.”
“This feat was achieved despite the global economic downturn spanning almost two years because of the COVID-19 pandemic. Without the pandemic, the average revenue effort of the Duterte administration from 2017 to 2021 would have reached an estimated 16.2 percent,” the DOF said.
“The highest average revenue effort of any administration was 16.4 percent, under then-President Ramos, due to proceeds from the administration’s thrust to privatize government assets,” it said.
“This ratio dipped to an average of 14.1 percent under the administration of then-President Joseph Estrada (1999 to 2000), and further fell to 14.0 percent under then-President Gloria Arroyo (2001 to 2010), before rising slightly to 14.3 percent under the watch of the late President Benigno Aquino III (2011 to 2016),” the DOF added.
As for the share of tax collections to GDP or the tax effort, the DOF said that “the Duterte administration’s average is 14 percent from 2017 to 2021, close to the 14.2 percent under the Ramos presidency.”
“Without the pandemic, the government under President Duterte would have exceeded the achievement of the Ramos administration and reached an even higher average tax effort of 14.8 percent,” the DOF said.
“The impressive tax effort in the first five years of the current administration has been attributed to the bold tax reforms and the aggressive digitalization and automation efforts of the revenue collecting agencies since President Duterte assumed office in 2016,” according to the DOF.
“The average tax effort under the Estrada administration was 12.7 percent. This fell to 12.1 percent under the Arroyo administration and went up to 12.7 percent during the Aquino III presidency,” the DOF report read.