BIR misses VAT collection target for 2007

The Bureau of Internal Revenue’s value-added tax (VAT) collections for 2007 amounted to P144.731 billion or P38.522 billion short of its P183.254 billion goal, latest data from the agency showed.

The P144.731 billion is 21.02 percent lower than the goal.

However, compared to VAT collections in the same period in 2006 of P140.934 billion, the latest figure is higher by P3.797 billion or 2.69 percent.

The BIR, attributed the shortfall to the lifting of the 70-percent cap or limitation on input tax.

Input VAT is the amount of sales tax shouldered by a firm every time it purchases a good or a product that already includes the 12-percent VAT in the price.

Output VAT is the gross VAT liability of a firm computed as the 12 percent of its gross sales.

VAT is the second biggest source of revenue for the government after net income and profits but tax agencies perennially fail to meet collection targets.

Under Republic Act 9337 or the Expanded Value Added Tax Act of 2005, a ceiling was imposed on input VAT claims to avoid abuses wherein taxpayers claim input VAT in excess of their output VAT forcing the government to refund the claims made by taxpayers.

The removal of the ceiling resulted in a P4.5 billion in lost revenues on the part of the BIR,  DOF data showed.

The BIR said the utilization of accumulated excess input tax by companies has also contributed to the lower-than-expected VAT collections.

Another reason cited by the BIR for the low VAT take is the increase in the availment of tax debit memos by government-owned and controlled corporations (GOCCs). These TDMs, issued by the Department of Budget and Management are used by GOCCs to pay their obligations to the BIR. They are, however considered non-cash revenues.

The government had hopes for VAT or sales taxes after Congress raised the rate to 12 percent in February 2006 from 10 percent previously as part of the government’s fiscal reform agenda.

Because of the lower-than-expected VAT take, the BIR failed to meet its P765.9-billion collection target for 2007, raising only P711.6 billion last year.