The Bureau of the Internal Revenue (BIR), the government’s main tax agency, missed its collection goal in the first-quarter due to higher availment of input value-added tax (VAT) credits by businesses.
In a statement released by the Department of Finance (DOF) on Sunday, May 22, the bureau reported that collections hit P485.4 billion from January to March, below the agency’s P532.6 billion target by 8.9 percent.
Despite the shortfall, DOF noted that the BIR’s end-March total tax haul was 7.2 percent higher compared with the P452.9 billion collections in the same period last year.
BIR Deputy Commissioner Arnel Guballa said the weaker than expected collection was driven by the utilization of the Tax Reform for Acceleration and Inclusion (TRAIN) law provision allowing outright crediting of input value-added tax on capital goods.
Under Section 35 of the TRAIN law, businesses can decide to fully utilize their input VAT credits on purchases.
Prior to Jan. 1, 2022, the Tax Code had required that input VAT from purchased capital goods with an aggregate acquisition cost of P1 million and above, must be spread out over a period of 60 months beginning the month of purchase.
With the outright crediting of input VAT by businesses, the BIR incurred a shortfall of P17.4 billion in VAT collections and another P9.4 billion in income tax collections for the first quarter of 2022 alone as compared to the targets, Guballa said.
On the other hand, the bureau’s collections from its non-BIR operations from January to March 2022 reached P18.1 billion, bringing its total collection for this period to P503.5 billion.
The total collection is higher by P33 billion or 7.0 percent from last year’s actual first-quarter collection of P470.5 billion, but lower by P48.3 billion or 8.8 percent from the DBCC target of P551.78 billion for this period.
However, compared to last year’s actual collected amount of P97.9 billion for the first quarter, the BIR’s collection this year of P113.5 billion from VAT is P15.6 billion or 16 percent higher, Guballa said.
The BIR, which contributes about two-thirds to government coffers, is tasked to collect P2.43 trillion this year.