REVENUE TARGET. Finance Secretary Ralph Recto cites the importance of hitting the PHP4.3 trillion revenue target for 2024 in a briefing at the Bureau of Customs in Manila on Wednesday (Jan. 24, 2024). Recto ordered the BOC and the Bureau of Internal Revenue to work together to attain the collection goal. (Photo courtesy of DOF)
MANILA – The government will not rely on the imposition of new taxes to meet its revenue target for this year and will instead focus on improving the collection efficiency of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), Department of Finance (DOF) Secretary Ralph Recto said.
In a briefing at the BOC office in Manila on Wednesday, Recto acknowledged that generating the PHP4.3 trillion revenue target for this year "is not a walk in the park."
The bulk of the tax revenues amounting to PHP3.05 trillion will be generated by the BIR, while the BOC is expected to collect close to PHP1 trillion.
Almost PHP300 billion, meanwhile, will come from the Bureau of the Treasury, Recto said.
"Recognizing the current economic challenges, we must not rely solely on imposing new or additional taxes," he said.
"As to imposing new taxes, frankly speaking, there are no plans of imposing additional new taxes. I think our first job is to collect what is on the table and that's why we are planning with the BIR and the Customs Commissioner to improve its efficiency. How do we collect more from the current taxes imposed in the tax code," he added.
Recto said that while he supports some of the tax reforms earlier proposed by former Finance Secretary Benjamin Diokno, the DOF is currently "refining" some of these proposals.
He said some of these need to be tweaked as the inflationary environment remains a bit high and imposing additional taxes will be inflationary.
Recto said one of these is the road users tax bill which seeks to provide adequate funding for the maintenance of national and provincial roads, as well as address air pollution from motor vehicles.
"We're tempering that proposal. Because I think that, you know, motorists pay a lot of taxes. There are excise taxes and VAT (value-added tax) on oil. There are excise taxes, duties, and VAT on vehicles," he said.
"Today, 50 percent or thereabouts of vehicles are unregistered. And if you impose higher taxes, maybe more vehicles will not register. So, I think we have to temper some of these increases because like I said, they're also inflationary. And, it's all about timing as well," Recto added.
He said the refined proposals will be presented to the Legislative Executive Development Advisory Council on Thursday and will be submitted to the Senate next week.
Recto revealed that the earlier proposal to tax sweetened beverages and junk foods was already scrapped by the DOF.
Improving tax collection
To attain the revenue target, Recto ordered the BIR and the BOC to collaborate closely in ensuring the ease of paying taxes and eliminating trade barriers that severely impact the country’s supply chains.
In particular, Recto directed the BIR to swiftly implement the Ease of Paying Taxes Act to deliver on its promise of prompt, efficient and excellent taxpayer service, ensuring that taxpayers receive value for their contributions.
He also instructed the bureau to run after tax cheats and intensify its campaign for tax compliance in a fair manner that favors no one.
Recto directed the BOC to channel all efforts towards significantly enhancing trade facilitation and strengthening border control to curb smuggling.
In this regard, Recto announced that the DOF is working with the Office of the Special Assistant to the President for Investment and Economic Affairs Secretary Frederick Go to implement an integrated system for pre-border verification and invoicing to reduce smuggling and misdeclarations.
Recto also encouraged the bureaus to accelerate their digitalization initiatives.
Manageable debt
During the briefing, Recto assured the public that the country's debt level remains manageable.
"Today, I'm not that much concerned about the national debt. It's not the size of the debt, but your ability to pay. Nominally, the debt looks high. It's PHP14.5 trillion, roughly 60 percent of gross domestic product (GDP) which is very manageable," he said.
Recto assured the public that the government is on track to reduce the debt-to-GDP to 51 percent by 2028.
"There are two ways of doing that. Raising taxes or a combination and growing the economy. So, to me, I think you can raise more revenue by growing the economy faster. When you grow the economy, you broaden the tax base and you collect more taxes. So, that's the general perspective, that's the general plan," he said.
‘Practical wisdom’
Manila Rep. Joel Chua commended Finance Secretary Ralph Recto's no new taxes pledge as "practical wisdom" as the DOF sets its focus on improving tax collection efficiency.
He said the DOF really has to focus first on making the present system "work much better", including rolling out the recent tax laws.
"With practical wisdom, Finance Secretary Ralph Recto, former Deputy Speaker of the House of Representatives, has assured Filipinos there will be no new taxes this year," Chua said. "Yes, there are new laws that do not impose new taxes so breaking them into the system and doing the advocacy work needed is absolutely necessary."
Chua said Recto's prudence is also evident in his recognition of the difficulty of introducing new taxes with the May 2025 elections "just around the corner".
"Our appeal to Secretary Recto is to uncomplicate taxation so that taxation can be easily understood by every employee, self-employed, and entrepreneur—and make all of us pay our taxes without any disappointment, resentment, or half-heartedness," he said.
Chua said that while he appreciates the no new taxes commitment, there are significant bills aimed at reforming the tax system without introducing new levies.
He cited the bill on reforming the real property valuation and assessment system, which is a fundamental revenue source for local government units (LGUs).
"Having been a city councilor of Manila before I ran for Congress, I can say that real property valuation and assessment happens to be the major source of revenues at the local government level. LGUs depend heavily on the real property tax, one of the oldest taxes in history. It is certainly not a new tax, so I am curious about what Secretary Recto and the Senate will decide about the House and Senate bills on real property valuation and assessment," he said.
He also noted House Bill 4125 on administrative tax reforms which is the follow-up to the Ease of Paying Taxes Act.
He said the bill seeks to make the tax system work better so it will be" easier for DOF to collect taxes and easier for taxpayers to pay taxes".
He said another major economic issue that requires attention is inflation. (with a report from Filane Cervantes/PNA)
