Tax reforms net P576 B in fresh revenues—DOF

The Department of Finance (DOF) reported that the comprehensive tax reform program (CTRP) initiated by President Duterte since he took office has yielded more than half a trillion pesos in fresh government revenues.

In a report to Finance Secretary Carlos G. Dominguez III, the DOF’s Domestic Finance Group (DFG) said reforms in the personal income tax (PIT), amnesty to delinquent taxpayers and higher sin taxes have brought in P575.8 billion to the state coffers from 2018 to 2021.

Last year alone, the tax haul from the Tax Reform Acceleration and Inclusion (TRAIN) Law, the Tax Amnesty Act, and the Sin Tax Reform laws reached P228.6 billion, or 13.7 percent above the target for the year.

TRAIN or Republic Act or RA No. 10963 provided 99 percent of taxpayers with significant tax savings resulting from lower PIT rates, while the Tax Amnesty Act (RA 11213) allowed errant taxpayers to settle their outstanding tax liabilities.

Meanwhile, the Sin Tax Reform laws (RAs 11346 and 11467 along with certain TRAIN provisions) imposed higher excise taxes on cigarettes, heated tobacco products, vapor products, and alcoholic beverages.

Dominguez said the passage and implementation of these tax reform laws, along with the subsequent Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, make President Duterte’s CTRP almost 90 percent complete.

Finance Officer-in-Charge Undersecretary Valery Brion said that in 2021, TRAIN contributed P171.1 billion in additional revenues, 8.3 percent above the target of P157.9 billion.

On the other hand, the sin tax laws hauled in P52.9 billion, or 22.7 percent higher than the target of P43.1 billion; and tax amnesty provided an additional P4.6 billion, Brion said.

Over a four-year period from 2018 to 2021, TRAIN added P476.1 billion; the tax amnesty law, P14.6 billion; and the sin tax laws, P85.billion to the state coffers.

Brion said the incremental revenues from these tax reform laws were earmarked to fund President Duterte’s “Build, Build, Build” program and the Universal Health Care (UHC) program.

Earlier, the DFG reported that despite the implementation of the CREATE Law, corporate income tax collection remained to be the highest source of the Bureau of the Internal collections, accounting for around 22 percent on average of total tax revenues.

CREATE reduced the corporate income tax rate from 30 percent to 20 percent for micro, small and medium enterprises (MSMEs) and 25 percent for all other corporations.

The share of CIT revenues to the gross domestic product (GDP) could have reached 3.2 percent without the pandemic, Brion said.

Dominguez said that TRAIN and the other enacted CTRP tax reform packages enabled the Duterte presidency to raise infrastructure spending to above 5 percent of GDP, double the level recorded by the previous four administrations.

It also allowed increased spending on social services for human capital development and gave the Philippines the fiscal strength to weather the worse of the COVID-19 global crisis in light of the huge financial requirement of pandemic response, he said.