Revenue effort drops to 15.89% in 2020
GOVERNMENT REVENUE as a share of gross domestic product (GDP), an indicator known as revenue effort, fell to 15.89% in 2020 due to the collapse in tax collections during the pandemic, the Department of Finance (DoF) said over the weekend.
Overall revenue fell 9% to P2.856 trillion in 2020, bringing the revenue effort down from 16.1% in 2019, the DoF said in an economic bulletin.
Tax effort, a subset of revenue effort representing the share of tax collected to GDP, fell to 13.93% last year from 14.49% previously.
The two main revenue-generating agencies saw their collections drop, with the Bureau of Internal Revenue reporting a 10.3% decline to P1.95 trillion and the Bureau of Customs recording a 14.7% decline to P538 billion.
The lockdown resulted in a 9.5% contraction for the economy in 2020, the steepest drop since records were first compiled in the postwar period.
Ramped-up pandemic spending, meanwhile, drove government expenditure to 23.52% of GDP last year, up from 19.46% in 2019. Last year’s spending to GDP ratio was also a record.
“The country should continue to adopt fiscal reforms, particularly tax reforms still pending in Congress, to sustain these fiscal gains,” the DoF said in the bulletin.
“Due to fiscal reforms, the country was able to fund the unprecedented fiscal requirements imposed by the pandemic and, at the same time, protect its strong macroeconomic fundamentals,” it added. — Beatrice M. Laforga