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Tax reform laws added P229 billion in revenues in 2021

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THE implementation of tax reform laws generated P228.6 billion in additional revenues for the government in 2021, exceeding the target by 14%, the Department of Finance (DoF) said on Tuesday.

In a report to Finance Secretary Carlos G. Dominguez III, the DoF Domestic Finance Group said the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law, the Tax Amnesty Act, and the sin tax reform laws helped boost the tax take.

DoF Undersecretary Valery Joy A. Brion said revenues from TRAIN reached P171.1 billion in 2021, surpassing the target by 8.3%.

She said the sin tax laws, which raised excise tax on cigarettes, heated tobacco products, vapor products and alcoholic beverages, contributed P52.9 billion to last year’s revenues. This exceeded the target by 22.7%.

The Tax Amnesty Act, on the other hand, generated additional revenues of P4.6 billion last year.

The DoF said the implementation of these laws, which are part of President Rodrigo R. Duterte’s Comprehensive Tax Reform Program (CTRP), helped generate P576 billion in additional revenues from 2018 to 2021.

Mr. Dominguez said the tax reform laws plus the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act makes Mr. Duterte’s CTRP nearly 90% complete.

From 2018 to 2021, TRAIN contributed P476.1 billion in additional revenues, while sin tax reforms and tax amnesty added P85 billion and P14.6 billion, respectively.

Mr. Dominguez said the tax reform packages helped the Duterte administration hike infrastructure spending to above 5% of gross domestic product, and increase allocations for healthcare and pandemic response programs.

Security Bank Chief Economist, Robert Dan J. Roces said that the revenue uptake for the said period could have been higher if not for the pandemic.

“But given this, closely tied into the collection is the economic reopening, with higher revenues a function of looser mobility curbs, which in turn is a function of better health outcomes,” Mr. Roces added in an e-mail.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail the outgoing administration deserves credit for passing key tax reforms.

“A robust growth momentum provided by previous administrations helped allow authorities the scope to slap additional taxes (income, sin, and excise) as the population was better placed to weather the increase in taxes. This in turn helped secure additional revenues that were used in the various infrastructure, investment, and stimulus projects to help bolster growth momentum further,” Mr. Mapa added.   

Mr. Roces said the incoming Marcos administration should adopt the DoF’s fiscal consolidation plan to improve tax efficiency and revenue effort.

“Additional taxes are never popular and tend to slow overall growth momentum by sapping consumption and investment. With the economy just exiting from the pandemic-induced downturn, perhaps the incoming administration is wary of carrying out relatively unpopular decisions for now,” Mr. Mapa said. — A.M.P.Yraola

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