Date: March 2003

BIR to Collect Tax Amounting to 10 Percent of GDP

It was not an ambitious goal, but the Bureau of Internal Revenue (BIR), the government's main agency that collects taxes, looks unprepared to meet its own modest target of collecting revenues accounting for 10 percent of the country's gross domestic product (GDP).

The goal now is to collect P433 billion for 2003, up from the Department of Finance's (DOF) goal of only P424 billion. The figure is also 10 percent higher than the P393 billion that the BIR actually collected in 2002.

The BIR is an agency under the DOF and collects around 72.5 percent of total government revenues annually. Other revenue collecting agencies include the Bureau of Customs, the Bureau of Treasury and other departments that charge fees for documents issued.

While the DOF set a target of only P424-billion tax revenues for 2003 or 9.6 percent of the projected GDP, the BIR saw it fit to set a higher target accounting for 10 percent of the GDP. Last year's BIR collection, however minimal it may be, already accounted for 9.9 percent of the GDP.

The problem is that while the BIR increases its targets for collection, its actual amount collected continues to fall short of the target. In January this year, for example, the BIR collected taxes amounting to only P34.17 billion, some 7.6% down from the P37 billion target set for the month and even 2.5% below the P35.04-billion actual collection for January 2002. The BIR, however, believes that collections in February would wipe out the shortfall in January.

The government incurred a budget deficit of P13.95 billion in January, although this amount was lower than the P16.8 deficit ceiling set for the month and the P14.97 billion incurred in January 2002.

While the government collected P50.926 billion in revenues in January, it spent P64.874 billion during the same month. Of the total expenditures in January, P19.141 billion or 29.5 percent went to debt interest payments.

Even with the shortfall in January, the BIR admitted that collecting taxes accounting for 10 percent of the GDP is a modest enough target. In 1997, BIR collections actually 12.97 percent of the GDP. Other Southeast Asian countries have tax collections accounting for 15 to 20 percent of their GDPs.

To increase its collection, the BIR has expressed hope that it will implement an "integrated tax program" this year. The program, however, needs the nod of the Philippine Congress.

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