THE Bureau of Internal Revenue (BIR) is banking on higher spending by Filipinos to offset the possible reduction in its collection of personal income tax as a result of the second round of income tax reduction under the TRAIN law.
BIR Commissioner Romeo D. Lumagui Jr. said money collected by the bureau from Filipinos’ consumption would be able to compensate for the reduction in their annual income tax filings.
“Hopefully, it will compensate. Effectively, with higher take-home pay, hopefully they will be spending,” Lumagui told reporters in a recent interview. “So, consumption tax.”
Under the TRAIN law, the tax rate for individuals earning between P250,000 and P8 million
would be slashed further by 2-percentage points to 5-percentage points depending on their tax brackets. The reductions in personal income tax took effect on January 1.
For example, the personal income tax of individuals earning between P250,000 and P400,000 would now be 15 percent of excess over P250,000 from 20 percent of excess over P250,000 before.
Aside from taxes collected through consumption, such as value added tax, the BIR would further improve its enforcement activities against illicit trade to boost the bureau’s collections, Lumagui said.
He disclosed that the BIR does not have a study yet on how much the bureau would lose from the reduced income tax. Nonetheless, Lumagui said, the lower income tax was already factored in the BIR’s revenue collection target of nearly P2.6 trillion this year.
“We have to just accept that, that’s it. We will look for ways [to collect more],” he said.
Some revenue regions of the BIR, such as Region 7A (Quezon City), have noted that the income tax reduction is one of the challenges in hitting their respective revenue target for the year. (Related story: https://businessmirror.com.ph/2023/03/09/bir-region-7a-eyes-over-%e2%82%a797b-in-revenue-collections-this-year/)
Earlier, finance officials expressed confidence that the BIR will achieve or even surpass its P2.599-trillion target revenue collections for this year on the back of an improving economy and digitalized taxpaying services. (Related story: https://businessmirror.com.ph/2023/02/08/dof-sees-bir-hitting-%e2%82%a72-599-t-target/)