BIR may miss collection goal this year

The Bureau of Internal Revenue (BIR) may struggle to meet its PHP 3.219-trillion collection target this year as sluggish government spending weighed on overall tax receipts, a development its chief said may prompt a tweak of its full-year target.

“The overall performance is low… so there’s a need to recalibrate or recalculate the entire goal,” BIR Commissioner Romeo D. Lumagui, Jr. told BusinessWorld in an interview in mixed English and Filipino. “As things stand, it’s going to be quite difficult.”

“It’s really a challenge to meet the unadjusted goal.”

While the BIR has intensified tax collection efforts by tightening enforcement in sectors with compliance gaps like tobacco, Mr. Lumagui said the flood control scandal and the resulting slowdown in state spending have weighed on tax collections.

“Even government spending was put on hold,” he said, as authorities clamped down on public works spending amid allegations that politicians, officials and contractors were involved in a multibillion-peso kickback scheme involving substandard or nonexistent flood control structures.

“There was a slowdown in government expenditures, and that’s why remittances from the Department of Public Works and Highways and other government agencies also declined,” he added.

The latest Treasury data showed that BIR collections jumped by 10.88% to PHP 2.32 trillion in the first nine months of the year. However, this was 2.63% lower than the programmed P2.38 trillion for the January-to-September period.

The BIR, the main revenue collection agency, needs to collect around PHP 897 billion to reach the PHP 3.219-trillion full-year program. 

“We’re pressured to meet our targets,” he told lawmakers at a House hearing. “It’s critical to meet our collection target for the budget, so that we will not borrow and we are able to support the fiscal program of the government.”

Mr. Lumagui said there are discussions to reduce the BIR’s collection target for the year.

“I’ve already written about that, but it’s up to them to decide what adjustments will ultimately be made,” he said in Filipino. “They’re still assessing the actual effects of what’s happening and the overall economic performance.”

Philippine gross domestic product grew by 4% in the third quarter, sharply slowing from the 5.5% in the second quarter and 5.2% a year ago, amid a corruption scandal involving infrastructure projects that has dampened sentiment.

The BIR’s failure to meet its collection target could compel the government to cut public spending — possibly dampening economic momentum at a time when stimulus is needed for recovery — or push it to increase borrowing that could strain fiscal stability, said John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies.

“The shortfall also underscores how governance issues like the flood control scandal can ripple through the economy,” he said in a Viber message. “When public spending stalls, tax revenues from contractors, suppliers and consumption also fall.”

In a Viber message, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said lower collections could reduce the government’s fiscal space on other priority spending items.

Lawmakers should look at coming up with measures that could boost tax collections to bolster government revenues, he added.

Excise tax collections

Meanwhile, Mr. Lumagui said the BIR has collected PHP 250.99 billion in excise taxes in the first nine months, 1.06% lower than its PHP 253.68-billion goal for the period.

“We have seen an improvement in our collections in excise tax, both in vape products as well as tobacco products,” Mr. Lumagui said. “This is… a result of our aggressive enforcement activities in connection with excisable articles.”

Tobacco has long posed a challenge for the government as hundreds of millions of pesos in potential excise tax revenue are lost annually due to rampant smuggling and misdeclaration.

Mr. Lumagui said the BIR had collected about PHP 106 billion in excise tax from cigarettes in the first nine months of the year from PHP 84 billion a year ago.

“That is the same for vape products,” he added, noting that excise tax collections from electronic cigarettes jumped to PHP 2.055 billion from PHP 449 million in the same period last year.

“We’ve seen drastic improvements on these as a result of our nationwide enforcement, both on vape products and tobacco cigarettes,” said Mr. Lumagui, as authorities visited thousands of establishments selling tobacco products to check for compliance.

He said about 377 shops were found violating excise tax regulations, with 742,000 packs of illicit cigarettes and 267,508 milliliters of untaxed liquid products amounting to an estimated PHP 122.8 million of unpaid excise tax, having been seized from January to September this year.

At the same time, the BIR collected PHP 1.19 trillion from taxes on net income and profit in the January-to-September period, just 0.75% short of the PHP 1.2-trillion goal for the period.

The BIR collected PHP 507.88 billion from value-added tax as of end-September, 2.16% lower than its PHP 519.08-billion program for the nine-month period. — Kenneth Christiane L. Basilio, Reporter