Gov’t moves to raise revenue effort

The Aquino administration commits to bringing the country’s “revenue effort”—a key measure of ability to shore up public funds as the economy grows—significantly closer to pre-Asian crisis levels by the end of its term in 2016.

Finance Secretary Cesar Purisima said the administration has set a the goal of hitting a revenue effort (computed as the proportion of the national government’s revenue collection to the country’s gross domestic product) of 16.9 percent by the time President Aquino steps down three years from now.

Prior to the 1997 Asian financial crisis, revenue effort stood above 18 percent, averaging 18.7 percent during the term of President Ramos.

Since the crisis hit the Philippines and the rest of East Asia 16 years ago, the country’s revenue effort has been on a downward trend. This is blamed on a host of factors, including tax evasion, the granting of unnecessary tax-exempt privileges to certain industries, and an inefficient tax collection system.

But Purisima said the Aquino administration is bent on reversing the trend. This will be made possible largely by improving tax administration, exhausting the means to detect tax cheats, and making as many Filipnos tax compliant as possible, he said.

The government likewise aims to further improve financial performance of state-owned firms so they can contribute more dividends to the state, he also said.

Revenue effort stood at 14.5 percent last year. It is targeted to hit 14.7 percent this year and to continue increasing until it reaches 16.9 percent by 2016.

Meantime, the “tax effort”—which takes into account only taxes, and which composes bulk of revenue effort—stood at close to 13 percent last year. It is targeted to grow to 13.5 percent this year and further until hitting 16 percent in 2016.

“What we will do is to increase the tax base,” Purisima said this week during a hearing in Congress on the proposed 2014 national budget.

He said that the Bureau of Internal Revenue will gather data from various government sources in order to determine the number of individuals and companies that are not filing income tax returns. The BIR likewise will fully implement the country’s tax laws in order to discourage tax evasion.

He cited recent findings by the BIR that while there are only 400,00 self-employed individuals, both professionals and entrepreneurs, who registered with the BIR for tax payment purposes, there are 1.8 million professionals registered with the Professional Regulation Commission.

The BIR will go after those who have not registered with it, he said.

He also said average annual tax payment by a self-employed individual is just around P35,000.

He said BIR will intensify audits to discourage income under-declaration. He said average tax payment by a self-employed individual should be P200,000.

BIR Commissioner Kim Henares also said the tax bureau will zero in on tax payments by suppliers and contractors for government projects and programs.

Henares also said income tax returns of corporate entities will continue to be matched with purchase reports of their clients to detect tax evasion.