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Philippines: Duterte government claims highest income tax, VAT share to GDP
MANILA, Philippines — The Duterte administration is seen booking the highest share of personal income tax (PIT) collection to the gross domestic product (GDP) after pursuing massive fiscal reforms, according to the Department of Finance (DOF).
Finance Assistant Secretary Valery Brion said the contribution of PIT effort averaged 2.4 percent of GDP between 2017 and 2021 as the government managed to improve compliance with the legislation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act in 2017.
Under the law, individuals with a net taxable income of below P250,000 were exempted from paying PIT from 2018 onward. In exchange, the law imposed excise taxes on basic goods like petroleum products and sugar-sweetened beverages.
Similarly, Brion said the share of value-added tax (VAT) collection to the economy also stood at 4.11 percent under President Duterte. The average would have been as high as 4.36 percent had the private sector weathered the impact of the pandemic.
Brion said the next highest VAT effort to Duterte’s was posted under the previous administration at 4.05 percent, followed by Arroyo’s 3.2 percent, Ramos’s 2.77 percent, Estrada’s 2.67 percent and Aquino’s 1.91 percent.
“On average, total VAT collections by the BIR [Bureau of Internal Revenue] and BOC [Bureau of Customs] account for about a third of total tax revenues. VAT is the third-highest revenue source for BIR, while it is the highest for BOC,” Brion added.
On the other hand, the share of corporate income tax (CIT) collection to the GDP averaged 3.1 percent under Duterte from 2017 to 2021.
According to Brion, the prior administration registered the highest CIT effort at 3.4 percent, as it slapped the former rate of 30 percent against firms.
President Duterte approved the Corporate Recovery and Tax Incentives for Enterprises last year cutting the CIT rate to 25 percent, from 30 percent, the highest among Southeast Asian nations.
In exchange, the law introduced a cap of 17 years on the use of fiscal incentives granted by the government to investors, removing the practice wherein firms can exploit their tax breaks for as long as they want. – Elijah Felice Rosales
Source: https://www.philstar.com/business/2022/03/12/2166631/duterte-government-claims-highest-income-tax-vat-share-gdp