Tax reform to drive revenues to P4.42 T by 2022

MANILA, Philippines — The government is expected to generate P4.42 trillion in revenue by 2022, driven by incremental tax collections arising from the tax reform program, according to the latest medium-term fiscal program of the Development Budget Coordination Committee (DBCC).

Based on a document obtained by reporters, government’s revenue for 2020 is programmed to increase by 12.8 percent to P3.54 trillion from the 2019 target of P3.15 trillion. This is expected to further rise by 11.8 percent to P3.95 trillion by 2021, and by another 11.7 percent to reach P4.42 trillion by 2022.

Of the total amount, tax revenues are expected to contribute P2.96 trillion this year, P3.33 trillion by 2020, P3.75 trillion by 2021, and P4.22 trillion by 2022.

Revenues to be collected from new measures under the government’s Comprehensive Tax Reform Program (CTRP) are estimated to reach P140.6 billion in 2019, P195.45 billion in 2020, P218.67 billion in 2021, and P234.68 billion in 2022.

Net revenues from the Tax Reform for Acceleration and Inclusion (TRAIN) Law, alone, is expected to amount to P113.07 billion this year, and rise further to P153.8 billion by next year, P159.73 billion by 2021, and P162.35 billion by 2022.

Package 2 Plus of the CTRP, which covers new alcohol and cigarette excise taxes, is seen to generate additional revenues amounting to P41.65 billion in 2020, P58.94 billion in 2021, and P72.33 billion in 2022.

Meanwhile, the collection target of the Bureau of Internal Revenue (BIR) is set at P2.27 trillion for 2019, and is programmed to grow further by 13.4 percent to P2.58 trillion in 2020, 13.1 percent to P2.91 trillion by 2021, and another 12.8 percent to P3.29 trillion in 2022.

Revenue collections from the Bureau of Customs, for its part, is programmed to reach P731.24 billion in 2020, 10.6 percent up from the 2019 target of P661.04 billion. This is projected to rise further to P813.44 billion by 2021, and to P900.35 billion by 2022.

Expenditures, on the other hand, is programmed to reach P3.77 trillion this year, before further increasing to P4.21 trillion in 2020, P4.7 trillion in 2021, and P5.24 trillion in 2022.

These would translate to nominal deficit figures of P624.37 billion for 2019, P677.57 billion for 2020, P747.66 billion for 2021, and P823.49 billion for 2022, all equivalent to 3.2 percent of the gross domestic product.

Earlier, the DBCC has capped the Philippines’ fiscal deficit at 3.2 percent of the gross domestic product (GDP) from 2019 to 2022.

This shows an upward adjustment from the three percent deficit-to-GDP ratio ceiling set for 2020 to 2022, as previously targeted by the DBCC.

Finance Assistant Secretary Maria Teresa Habitan attributed the adjustment to changes in the revenue program, as well as the pressure for infrastructure program to come on stream by 2022.

The Department of Finance (DOF) wants to focus on the passage of the remaining packages under the CTRP to ensure sustainable financing for the government’s infrastructure and human capital development programs.

Among the tax reform packages yet to be passed by Congress include Package 2, which aims to lower the corporate income tax and modernize the fiscal incentives system; Package 3, which seeks reforms in the property valuation system; and Package 4, which rationalizes capital income taxation.

The DOF is also looking forward to the approval of the remaining provisions under Package 1B the motor vehicle user charge, lifting of bank secrecy and automatic exchange of information and Package 2 Plus particularly the increase in alcohol excise tax.