EMBARGO FOR MONDAY ISSUE 

The national government's tax effort in the first half of the year increased slightly on the back of improved collections by the government's two tax agencies.

Based on the data released by the Department of Finance (DOF), the government's tax effort posted a slight increase from 14.5 percent to 14.6 percent between January and June 2024, compared to the same period in the previous year.

Tax effort is a metric that measures the ratio of tax collections to the country's domestic economy, typically represented by the gross domestic product (GDP).

The Bureau of Internal Revenue (BIR) improved its collection efficiency, with its tax effort rising to 10.8 percent from 10.6 percent in the corresponding period last year. 

In contrast, the Bureau of Customs recorded a tax effort of 3.6 percent, a decrease from 3.8 percent in the previous year.

The marginal increase in tax effort occurred after the economy grew by 6.3 percent in the second quarter, bringing the country’s first-semester GDP growth to 6.0 percent, within the government’s target of 6.0 percent to 7.0 percent.

In June, the economic managers adjusted downward the projected tax collections for the BIR and the BOC.

Budget Secretary Amenah F. Pangandaman said that the Development Budget Coordination Committee (DBCC) has revised down this year's targets for the government's two main tax agencies.

According to the DBCC's 2024 Quarterly Fiscal Program approved last May 23, the BIR and BOC are now expected to collect P3.788 trillion this year, a 5.6 percent decrease from the original target of P4.014 trillion.

The DBCC adjusted the BIR's full-year collection target down by 6.7 percent to P2.848 trillion from the earlier goal of P3.055 trillion.

In the first four months of the year, the BIR collected P970.3 billion, equivalent to 69.1 percent of the agency's first-semester target of P1.403 trillion.

The Customs bureau's target for the year was also lowered by two percent to P939.7 billion from the previous estimate of P959 billion.

As of the end of April, the BOC collections totaled P490.55 billion, surpassing the first-half 2024 target of P442.6 billion.

Pangandaman, who chairs the DBCC, said the reduction in the tax collection target stemmed from a lower-than-expected economic growth outlook, among other contributing factors.

Back in April, the DBCC, an inter-agency body tasked with formulating the government's macroeconomic assumptions, revised the gross domestic product target for 2024 to a range of 6.0 percent to 7.0 percent from the previous 6.5 percent to 7.5 percent.

The DBCC said the adjusted targets were based on an analysis of the country's economic performance in 2023 along with the latest developments and forecasts regarding external factors such as global demand, trade trends, fluctuations in oil prices, and expected movements in exchange rates and inflation.

The proportion of the country's outstanding debt relative to its overall economic output returned to its post-pandemic peak in the second quarter, data from the Bureau of the Treasury revealed.

Despite a higher growth rate, the gross domestic product (GDP) failed to keep pace with the government's borrowing, leading to a rise in the debt-to-GDP ratio to 60.9 percent from 60.1 percent in the previous quarter.

Based on the Treasury data, the debt ratio in the second quarter matched the full-year 2022 record of 60.9 percent, a figure cited by Finance Secretary Ralph G. Recto during the budget hearing last Monday as the "post-pandemic peak."

The most recent debt-to-GDP ratio also surpassed the full-year 2023 level of 60.1 percent as well as above the 60.6 percent target for 2024. It also exceeded the recommended threshold of 60 percent for developing economies like the Philippines.

To reduce the debt ratio, the Philippines needs to increase its economic growth more rapidly than its debt stock.

The Philippines’ debt-to-GDP ratio has begun to decline from its 2022 peak to 60.1 percent in 2023. The Marcos administration targets to push this ratio even lower to below 60 percent over the medium term.

As of June 2024, the government debt has reached P15.48 trillion, seven percent higher compared to P14.52 trillion in the same month last year.