By Chino S. Leyco
The Duterte administration’s first tax reform law missed its net revenue target in the first nine months last year, but Department of Finance (DOF) was quick to explain that the new measure has directly benefited Filipinos through additional spending power.
Verified DOF data distributed to reporters last Friday showed that the tax reform for acceleration and inclusion (TRAIN) law generated a net revenue of P41.9 billion in January to September last year, below by 5.4 percent against the P44.3-billion target for the period.
Based on the DOF report, the sweetened beverage excise and the value-added tax (VAT) rationalization dragged down TRAIN revenues at end-September, while the additional sin taxes along with the new documentary stamp tax rates recorded above target collections.
Finance Secretary Carlos G. Dominguez III, however, emphasized that the “big number” in the TRAIN performance report is the reduction in personal income tax, which directed benefited individuals who are earning less or more than P250,000 annually.
According to the DOF, revenues from TRAIN VAT, which raised the exemption threshold from P1.9 million to P3 million, amounted to only P3.6 billion the first three-quarters, significantly lower compared with the P24.8-billion goal.
The DOF said the Bureau of Internal Revenue (BIR) saw a surge in input VAT claims last year, and only three industries have actually reported “VATable” importations during the period, which weakened the revenue collection from the consumption levy.
The DOF-revenue operations group is now investigating the reasons behind the low VAT collection performance.
The DOF likewise reported that sugar-sweetened beverages (SSBs) excise raised only P31.2 billion at end-September, below the expected P43.3 billion after sugary drink manufacturers opted for non-high fructose corn syrup to avoid paying higher levies.
Other TRAIN measures that missed their targets were financial taxes with P2.4 billion instead of P5.2 billion, and other excise taxes with P2.3 billion, lower than the P3.1-billion target.
There were also higher-than-expected losses from the rationalized estate tax and donor tax systems.
Meanwhile, the DOF raised P43.4 billion from higher taxes on petroleum products, slightly above the P43.3-billion target, while automobiles marginally surpassed the P11.6-billion goal by five percent to P12.2 billion.
Sin tax collection from cigarettes also breached the target of P3.3 billion to P5.9 billion, while documentary stamp tax (DST) raised P49.1 billion, way above the P21-billion target.
“Tobacco excise is above target… due to better compliance and advance production,” the DOF said. “DST is above target… given higher transactions values and better collection efficiency.”
While the TRAIN missed the net revenue goal, Dominguez still believes the first tax reform law has “succeeded” in providing Filipinos with higher earnings following the reduction in personal income tax rates.
“The reduction in personal income tax in the first nine months is P102.9 billion, that is around close to P12 billion a month, that means to say individuals had actually additional P12 billion a month’s spending power,” Dominguez said.
“Don’t look at only the collection, look at what was given up and they were given up directly to individuals. This TRAIN law benefited directly individuals who are earning P250,000 or even those earning P250,000,” he added.
“TRAIN has succeeded 100 percent to that regard, in collections we succeeded for the first nine months, 94.7 percent. In any grading, it’s not so bad,” the finance chief concluded.
The DOF programmed P108.7-billion losses from personal income tax at end-September.