Tax take seen to improve for remainder of 2009

MANILA, Philippines - The government’s tax effort is likely to improve in the remaining part of the year due to faster-than-expected growth in the second quarter of 2009, the Department of Finance said during the weekend.

Tax collections will likely pick up in the third quarter of the year and the improvement is expected to continue because of the 1.5 percent gross domestic product (GDP) expansion from April to June, Finance Undersecretary Gil Beltran said.

The 1.5 percent second quarter GDP growth beat the government’s projection for the period of between -0.1 percent and 0.9 percent.

“We expect better collections in the next quarter,” he told reporters. He said there is a one-month lag before the impact of higher or lower growth in the economy is felt on tax collections.

The economy grew by only 0.6 percent in the first quarter, bringing first half growth to only one percent from four percent in the same period last year.

However, the economy was able to pick up in the second quarter on the back of stronger consumer spending.

With higher-than-expected GDP growth in the second quarter, the government is confident of achieving its full-year economic growth projection of 0.8 percent to 1.8 percent.

The Development Budget and Coordination Committee, however, has put a conservative tax effort projection of 13.9 percent of GDP from 14 percent of GDP last year. Tax effort refers to the tax collected as a percentage of the domestic economy as measured by the GDP.

In the first half of the year, the government’s tax effort slipped to 13.5 percent from 14.7 percent of GDP in the same period in 2008.

Government tax collections, meanwhile, are expected to post a 3.1 percent growth to P1.082 trillion this year from P1.049 trillion.

From January to June, tax collections declined by 5.1 percent to P486.4 billion from P512.4 billion in the same period last year.

Beltran said lower import volumes for both crude and non-crude oil imports as well as the implementation of several revenue eroding measures such as the Tax Relief Act under Republic Act 9504, the reduction of the minimum corporate income tax rate to 30 percent from 35 percent and the franchise tax on electricity transmission all contributed to the decline in tax collections.