Gov’t revenue as share of GDP hits record levels; deficit below target

GOVERNMENT revenue as a proportion of the economy rose in the first half as tax reform provided more fiscal space for spending, but the budget deficit remained below target.

In an economic bulletin over the weekend, the Department of Finance (DoF) said that the fiscal deficit was 2.34% of gross domestic product (GDP) in the first half, below the 3% ceiling the government is planning for 2018.

Revenue effort grew 1.47 percentage points year-on-year to 17.12% in the first half.

It also grew from 15.82% in the first quarter. The DoF said this level was the “highest ever achieved during the first semester.”

Tax effort, or collections as a proportion of the economy, rose 1.01 percentage points year-on-year to 15.23% in the first half, and from 14.47% in the first three months of the year.

“Almost a half or 0.4 percentage point is due to TRAIN (the Tax Reform for Acceleration and Inclusion law) and the rest or 0.61 percentage points due to tax administration improvements,” according to the economic bulletin.

The Bureau of Internal Revenue had a 11.71% tax effort, up from 11.28% a year earlier, and the Bureau of Customs came in at 3.39%, from 2.80%.

Other agencies’ tax effort fell to 0.13% from 0.14%.

Non-tax revenue effort grew to 1.89% during the period from 1.43%.

On the expenditure side, the DoF said that disbursement effort rose 1.77 percentage points year-on-year to 19.47% in the first six months, noting that this level was the “highest first semester expenditure effort since 2003, thus boosting its contribution to GDP growth.”

“Fiscal space expanded by TRAIN 1 and tax administration (improvements) enabled government to boost investment and growth in the first semester,” the DoF said.

“In the first semester of 2018, NG (national government) capital outlays expanded by 42.4% in nominal terms, boosting GDP growth by almost a percentage point while government current expenditures rose 26.6%, contributing an incremental 1.16 percentage points to growth,” it added.

Nominal GDP growth was 9.6% in the first semester, according to the DoF.

“Strong macroeconomic fundamentals backed by tax reform and the Build, Build, Build program will continue to boost economic growth as the competitiveness of the economy rises and more jobs are created,” the DoF said in its economic bulletin. —