Personal Taxes

Private revenue tax stays main gov’t income supply – Manila Bulletin

Personal income tax (PIT), which is withheld from an employee’s salary and paid to the government, remained a major revenue stream for the government despite the lowering of rates on individual taxpayers and the pandemic-induced economic slowdown.

Data released from the Department of Finance (DOF) released on Friday, March 11, showed that the national government’s PIT collections as a share of the gross domestic product (GDP) averaged 2.4 percent during the Duterte administration.

DOF noted that the 2.4 percent ratio is higher compared with the late President Aquino III’s 2.1 percent PIT effort, and the Arroyo and the Ramos presidencies’ average of 1.9 percent.

Trailing the Duterte administration’s average PIT effort was the 2.2 percent rate during President Estrada’s term. The administration of the late President Corazon Aquino averaged 1.1 percent.

“The impressive tax effort in the first five years of the current administration has been attributed to the game-changing measures that President Rodrigo Duterte implemented under his Comprehensive Tax Reform Program (CTRP) since he assumed office in 2016,” DOF said.

In particular, Finance Assistant Secretary Valery Brion said the high PIT effort can be attributed to “better compliance and an increase in registered taxpayers” that followed the enactment of the Tax Reform for Acceleration and Inclusion (TRAIN) Law in 2018.

Brion said TRAIN benefited almost all individual taxpayers.

“The PIT reform under TRAIN made income taxation more equitable and a win-win for taxpayers, especially the low-income earners,” Brion said.

Brion said the highest average value-added tax (VAT) effort was also under the Duterte administration since this tax was introduced in 1988, while its emerging excise tax effort is also highest since 1993.

President Duterte’s emerging average corporate income tax (CIT) effort covering the period from 2017 to 2021 is at 3.1 percent, and is second only to the Aquino III administration’s 3.4 percent despite the substantial reduction in the CIT from 30 to 20 percent.

The previous CIT rate of 30 percent was the highest in the region, which made the Philippines less attractive to prospective investors.

“The share of CIT revenues to GDP could have reached 3.2 percent without the pandemic. The CIT remains to be the highest source of Bureau of Internal Revenue (BIR) collections, which accounts for around 22 percent on average of total tax revenues,” Brion said.

For excise tax collections, the Duterte presidency’s average tax effort of 2.2 percent nearly doubles the 1.2 percent of the preceding administrations of Aquino III and Arroyo, and is also higher than the 1.8 percent under Estrada and the 2 percent under Ramos.

This ratio could have been higher at 2.3 percent without the pandemic which would have been at par with the highest average excise tax effort of 2.3 percent during the Corazon Aquino administration, Brion said.

“The increase under the Duterte administration is owed to the tax reform measures successfully legislated, such as TRAIN and the two “sin” tax reform laws. The fuel marking program, which is one of the tax administration measures under TRAIN, also contributed to the high excise tax effort,” Brion said.

She pointed out that TRAIN also imposed an excise tax on sweetened beverages and cosmetic procedures and increased the excise tax on cigarettes, petroleum products, coal, mining, and automobiles.

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