Fitch sees higher govt revenue this year
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Sun, 16 Feb 2020 12:27:32 +0000
The share of government revenues to the total economy is likely to widen this year on the back of recently passed tax measures, Fitch Ratings projected.
“Fitch expects the Philippines’ fiscal profile to improve over the coming year, supported by continued progress on tax reforms, which should lead to higher government revenues,” it said in a report released last week.
In particular, the credit ratings agency highlighted the recent passage of the Package 2 Plus of the government’s Comprehensive Tax Reform Program (CTRP). The measure, or the Republic Act 11467, was signed into law last January 23. It imposes additional “sin” taxes on alcohol, heated tobacco, and vapor products.
The Department of Finance estimated earlier the net incremental revenue from the measure to reach P17.1 billion this year.
With this, Fitch said “We expect revenue gains from this package and Tax Package 1A, passed in 2017, to raise central government revenues to about 16.9 percent of GDP (gross domestic product) from an estimated 16.7 percent in 2019.”
Implemented at the start of 2018, Package 1A or the Tax Reform for Acceleration and Inclusion (Train) law exempts those earning annual taxable incomes of P250,000 and below from paying personal income taxes. In exchange, new taxes were imposed on automobiles, fuel and sugar-sweetened beverages, among others.
Latest available data showed that combined Bureaus of Internal Revenue (BIR) and of Customs (BoC) collections from the Train law reached P91.3 billion in the first nine months of 2019. This was 107-percent higher than the actual Train revenues in January-September 2018.
Total revenues for the nine months to September were said as to have surpassed the government’s P77.3-billion estimate for the period by P14.1 billion, or 18.2 percent.
Meanwhile, Finance Secretary Carlos Dominguez 3rd has reported that on the strength of Train and tax administration reforms, BIR and BoC managed to collect over P2.8 trillion, combined in 2019, with the internal revenue agency posting a 10.67-percent increase in collection to P2.33 trillion and the customs bureau collecting 6.32-percent higher with P630.57 billion.
Going forward, Fitch said “Progress on tax reforms would keep the general government deficit at about -1.2 percent of GDP until 2020, according to our projections, helping to contain the Philippines’ government debt levels even as the administration’s infrastructure program continues.”
It also expects the general government debt-to-GDP ratio to decline to about 35.7 percent by 2021 from an estimated 36.5 percent in 2019.
Earlier, Dominguez reiterated that he hopes Package 2 of the CTRP — the Corporate Income Tax and Incentives Rationalization Act or Citira — would be finally passed into law by March.
Citira aims to reduce the corporate income tax rate from 30 percent to 20 percent in 10 years. It also aims to modernize the country’s fiscal incentive system to establish a single menu of incentives that are performance-based, targeted, time-bound, and fully transparent.
Dominguez added he also expects the rest of the CTRP packages to be passed this year.
These are the proposed Passive Income and Financial Intermediary Taxation Act, which is seen to make the country more attractive for long-term investments through reforms in the financial sector; and the real property valuation reform bill, which aims to adopt globally benchmarked standards and inculcate a higher degree of professionalism in property valuation.