Revenue effort target breached in Q3

MANILA, Philippines - The Aquino administration is collecting more revenues than targeted even as the economy slowed down in the third quarter, but the Department of Finance (DOF) said this does not mean there is space for an income tax cut.

According to official figures, the national government's revenue effort hit 16.84 percent as of September, breaching the 16.3-percent target for the year. 

Revenue effort measures the proportion of revenues collected by the state as the economy grows. Theoretically, a fast-growing economy means more revenues earned.

The Philippine economy, as measured by gross domestic product (GDP), grew 6 percent in the third quarter, faster than the revised 5.8 percent in previous three months, but slower than 6.4 percent a year ago.

"These are courtesy of one-off revenues which are not sustainable in the long run. We still have a narrow tax base and we cannot afford to lose more," Finance Undersecretary and chief economist Gil Beltran said in a phone interview.

While revenue-to-GDP ratio has beaten its goal, the tax-to-GDP of 14.22 percent remains below the 15.3-percent target.

Broken down, revenues collected by the Bureau of Internal Revenue (BIR) accounted for 11.28 percent of the economy. The goal for this year was pegged at 12 percent.

The Bureau of Customs, meanwhile, recorded a tax effort of 2.82 percent, still down from its 3.1-percent target for the year. 

The lower tax effort despite strong revenue effort means some revenues generated were not in the form of taxes, Beltran explained.

"For instance, we got revenues from the transfer of coco levy funds. Bonds floated by the Treasury are also charged levies," he pointed out.

"These are revenues which are not likely to be there in the long run," he added.

The Supreme Court ordered the transfer of 24 percent of shares in San Miguel Corp. to the government, part of the total stocks it sequestered in 1986 on suspicion they were purchased using coco levy funds.

The high court, in its ruling in December 2013, said the coco levy is public in nature. The stocks worth P62.1 billion as per latest DOF estimate.

Meanwhile, the DOF has consistently opposed legislative proposals to lower income taxes, saying this would cost the government P30 billion annually and would derail the country's credit standing.

President Aquino has also been cool to the proposal leading House Speaker Feliciano Belmonte Jr. to say last Monday that it would be "better to spend your time on something that will get approved."

"We are still operating in a deficit," BIR Commissioner Kim Jacinto-Henares said earlier.

As of September, the budget deficit - which indicates more revenues spent than earned-- stood at P25.5 billion, below the P283.7-billion target for the year.

As a percentage of GDP, it accounts for a measly 0.27 percent against a two-percent cap, figures showed.