The Philippines should continue to adopt tax reforms, including those pending in Congress, to sustain fiscal gains amid the lingering global health crisis, Finance Undersecretary and chief economist Gil Beltran said over the weekend.
“Due to fiscal reforms, the country was able to fund the unprecedented fiscal requirements imposed by the pandemic and, at the same time, protect its strong macroeconomic fundamentals,” Beltran said in an economic bulletin.
Beltran issued the statement following latest data showing fiscal reforms boosted the tax effort this year by 0.55 percentage point to 14.77 percent, moving close to the 2019 first semester level of 14.86 percent.
The tax effort peaked to 14.49 percent in 2019, the highest in 22 years.
Total revenue slightly dipped from 16.94 percent in the first semester last year to 16.35 percent this year.
Non-recurrent tax revenues last year were boosted by the government-owned and controlled corporations’ dividends under the Bayanihan 1 Act to help combat the effects of the pandemic.
Tax effort rose by 0.55 percentage point to 14.74 percent from 14.19 percent last year on higher collections from the Bureau of Internal Revenue, Bureau of Customs and other offices.
BIR tax effort rose from 11.15 percent to 11.32 percent, up by 0.17 percentage point. BOC tax effort rose from 2.95 percent to 3.31 percent, up by 0.36 percentage point.
Beltran said tax collections improved partly because of tax reforms which include legislative measures and digitalization of revenue collections’ operations.
Expenditure effort rose to 24.21 percent, the highest in history and 0.74 percentage point higher than the 23.47 percent in 2019.
The government deficit settled at 7.86 percent of GDP, higher than 6.53 percent deficit set last year, on continuing Covid-related programs.
Finance Secretary Carlos Dominguez III said last week fiscal discipline would save the country from the worst economic impact of the pandemic.
Dominguez said in an online Development Budget Coordination Committee hearing at the Senate that with fiscal discipline and economic reforms, the Philippines came fully prepared to meet the global health crisis head-on.
“When the pandemic struck, we were financially ready. Our strong fiscal position, buttressed by our tax reforms and better tax administration, served us well,” Dominguez said.