Purisima says $4.5B in revenues lost to low tax effort

THE Aquino government yesterday said about $4.5 billion to $5 billion in revenues or about three percent of the gross domestic product (GDP) is lost yearly due to lower tax effort ratio.

Finance Secretary Cesar Purisima said the Asian average tax effort ratio is 16 percent while the country could only manage a tax effort of 12.8 percent.

”Thus, we are lagging behind by three percent, that three percent is about $4.5 to $5 billion,” Purisima said.

The last time the country came at par with the Asian average tax effort was in 1997 when the government posted a tax effort ratio of 17 percent.

The tax effort ratio has been on the decline since then.

Purisima stressed this was unacceptable since the country has one of the highest tax rate compared to its regional neighbours.

”We hope to get that, considering that compared with our regional neighbours,  RP has higher tax rate, but how come we are not doing good in terms of efficiency rate?” he said.

He said the country’s total GDP is estimated at $150 billion. GDP is the total value of goods produced and services rendered in an economy in a given period.

“We want to recover that three percent and if possible even more,” he said.

Purisima earlier said the goal is to improve the tax effort ratio from the present 12.8 percent of GDP to 15 percent after about a year. Last year, actual tax effort was at 11.6 percent of the GDP, below the goal of 13.9 percent.

This year’s tax effort target is 13.8 percent.

The tax effort, a measure of collection efficiency, is the ratio between tax collection and the gross domestic product.

The economy surged during the first quarter, posting a 7.3 percent growth against a marginal 0.5 percent expansion in the same period last year.

The return to pre-crisis growth path was attributed to the recovery of the global economy, higher government spending and robust consumer spending during the election period.

This was the economy’s best quarterly performance since an 8.3 percent growth in 2007.

The government ended 2009 with a record budget deficit of P298 billion, nearly four percent of the GDP.

For this year, the new Aquino government faces a record budget shortfall of P325 billion or 3.9 percent of the GDP, which was revised from the original target of P293 billion.

From January to May, the government’s budget deficit already stood at P162.1 billion, breaching the first half deficit ceiling of P145.2 billion and above the budget gap recorded in the same period last year of P123.2 billion.

In May alone, the government incurred a deficit of P30.5 billion, more than double the P11.4-billion deficit incurred in the same period last year or an increase of 168.2 percent, largely because of higher expenditures. Dino Ng

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