Tax reform expected to improve gov’t revenue as share of GDP

THE BUDGET department expects revenue effort, a measure of tax collection eff iciency, to rise to 17.7% of gross domestic product (GDP) by the time the administration steps down from off ice, aided by the comprehensive tax reform program currently going through the legislative mill.

In its fiscal projections, the Department of Budget and Management (DBM) said revenue as share of GDP is expected to show gains from the tax reform program and rise to 17.7% in 2022 from the current 15.2%

A 16.6% revenue effort in 2018 — the year where the government expects the tax reform to be implemented — and 2019-2021’s 16.9%, 17%, and 17.3%, respectively.

The latest configuration of the reform program, House Bill 5636, or the Tax Reform For Acceleration and Inclusion Act, projects P157.2 billion in additional revenue in its first year of implementation, accounting for 0.9% of GDP.

The tax reform program features lower personal income tax rates, harmonized estate and donor taxes, the removal of some valueadded tax exemptions, higher excise taxes on petroleum products and automobiles, and an excise tax on sugar-sweetened beverages.

The bill is currently at the House for plenary deliberations, and is expected to be passed on third and final reading by May 31.

The government’s spending effort — or government disbursements as a share of GDP — is expected to grow to 20.7% by 2022 from the expected 18.2% this year.

The government’s fiscal deficit is expected to rise to P776.6 billion from the P482.1 billion programmed for this year, while keeping the deficit cap at 3% of GDP throughout the medium term.

The 2018 Budget is now being prepared by DBM and will be submitted to Congress before President Rodrigo R. Duterte delivers his second State of the Nation Address on July 24, 2017.

This year, the administration aims to spend P860.7 billion on infrastructure which is equivalent to 5.4% of GDP. This number is expected to rise by 2022 to at least 7.1% of GDP, according to economic managers.

Massive infrastructure spending is expected to slash unemployment to 3-5% by 2022 from 5.5% last year, while growing the economy by 7-8% for the rest of the presidential term.