TRAIN overshoots target on income tax savings

Published October 14, 2019, 12:00 AM

by manilabulletin_admin

By Chino S. Leyco

The tax reform for acceleration and inclusion act (TRAIN) surpassed its revenue target in the first semester of the year due to lower-than-expected losses from the reduction in personal income tax rates, data from the Department of Finance (DOF) revealed.

dof building 3

Based on detailed TRAIN performance report submitted to Finance Secretary Carlos G. Dominguez III, the net revenue generated by the first tax reform measure amounted to P55.6 billion, exceeding by 6.8 percent the P52.1 billion goal for the period.

The end-June TRAIN net revenue gain was about half or 49.2 percent of the P113.1 billion full year target as well as 65 percent higher compared with the same period last year.

According to the report, four of the seven major tax gain measures under TRAIN covering petroleum, tobacco products, sugary drinks, and documentary stamp tax (DST) beat their combined targets by P9.8 billion.

Meanwhile, higher taxes on cars, the rationalization of value-added tax (VAT) fell short of their total goals by P11.2 billion.

But TRAIN’s lower income from major revenue generating measures has been compensated by the P11.9 billion savings from the lower-than-expected losses from the reduction in personal income taxes.

The DOF original estimated that reduced withholding tax rates would incur P64.5 billion in losses in the first semester of the year, but the actual foregone revenues only amounted to 52.5 billion.

The DOF explained the lower revenue losses from personal income tax was “due to better compliance, increase in registered taxpayers, and lower unemployment and underemployment rates.”

According to the DOF, TRAIN petroleum excise tax generated P54.4 billion at end-June, higher than the P50.9 billion target by seven percent, while the new excise tax on sugary beverages raised P24.9 billion, also above by six percent against the P23.4 billion goal.

The imposition of higher “sin” tax on cigarettes exceeded the P6.1 billion target by 33 percent to P8.1 billion in the first semester, while total collections from DST amounted to P20 billion, also above by 16 percent compared with the P17.2 billion target.

The heaviest drag on TRAIN, on the other hand, was the excise tax on automobiles that came short of the P8.9 billion target by 86 percent to P1.2 billion, followed by VAT at P3.9 billion, below the goal of P7.5 billion by 48 percent.

“Automobile excise tax is short by P7.7 billion due to lower volume of imports. January to May 2019 imports declined by 8.3 percent, partly due to the base effect of higher importation in 2018, as people took advantage of lower tax rates for higher-priced vehicles,” DOF said.

“VAT is short by P3.6 billion. The main reason cited by the BOC [Bureau of Customs] is that there are only six previously-exempted taxpayers that reported importations, which are now VATable,” the department said.

These previously-exempted taxpayers were power transmission, jewelries, National Grid Corp. of the Philippines, Philippine Sports Commission, Armed Forces of the Philippines, and the Bangko Sentral ng Pilipinas.