REVENUE generated by the Tax Reform for Acceleration and Inclusion (TRAIN) law amounted to P33.7 billion in the first half, exceeding the P30.1 billion target, the Department of Finance (DoF) said.
Finance Undersecretary Karl Kendrick T. Chua told the Senate that TRAIN revenue is “on the dot,” in a presentation during a Senate hearing yesterday into the fuel excise tax suspension for 2019.
The revenue generated is equivalent to 53.23% of the DoF’s downward-revised full-year target of P63.3 billion.
“We are on track,” Mr. Chua said.
The Development Budget Coordination Committee initially estimated total TRAIN revenue for 2018 at P89.9 billion, but this was lowered by P26.6 billion due to the delay in implementation of the e-invoicing system and the fuel marking program provided for under the law.
In the first half, TRAIN revenue included excise tax collections of P55.8 billion, below the P69.6 billion target.
TRAIN-related excise taxes collected from petroleum, sugar-sweetened beverages, coal, and minerals were short of their targets, while those raised from tobacco and automobile levies exceeded their goals.
Value-added tax (VAT) collections meanwhile totaled P300 million, far short of the P18.6 billion target.
On the other hand, foregone revenue from reduced income taxes was lower than expected at P51.5 billion compared to the P70.5 billion projected.
Other sources of TRAIN revenue meanwhile generated P29.1 billion, above the P12.4 billion target.
Data from the Bureau of Internal Revenue show that TRAIN-related revenue for the eight months to August was only P10.6 billion — well below the P41 billion estimate for the period — largely due to forgone VAT revenue and collection shortfalls from petroleum, coal, and sugar-sweetened beverage excise taxes.
But Mr. Chua called the BIR data “inaccurate,” and “still being reviewed,” as the raw data have yet to reflect the big picture of TRAIN’s actual impact.
“VAT, we see very low collections. We are actually trying to understand. Maybe some of the VAT payers shifted away from the VAT, to percentage tax,” he said.
TRAIN, or Republic Act No. 10963, reduced the number of VAT exemptions for individuals, but raised the VAT-exempt threshold to P3 million in gross sales, from P1.9 million previously, for self-employed persons and professionals.
“Another reason for that is our large importation for capital equipment for the ‘Build, Build, Build.’ We are charging more input than output VAT…so there will be a temporary net VAT shortage but it also means that once the infra is built and used, they will generate output VAT.,” added Mr. Chua.
He also said that the lower-than-expected revenue from sugary drinks was due to the delay in the issuance of the implementing rules and regulations, as different types of drinks incur varying tax rates.
“We had to determine for certain products if they are milk or non-milk products because milk determines whether you are exempt. There were also issues about whether that product contains regular sugar or syrup,” he said.
Mr. Chua said that it is more accurate to measure the full-year revenue impact of TRAIN.
“On petroleum, there’s also a timing problem because in the first 45 days we do not expect any collection. The gasoline stations held a buffer stock,” he said, acknowledging that stock may have been built up before TRAIN took effect to avoid the excise.
“There are many reasons why it is hard to (estimate). We prefer to look at the entire year,” he said.
Budget Assistant Secretary Rolando U. Toledo said that the fuel marking program will be awarded to the winning bidder “within the month or hopefully within the week.”
He said that it is “possible” that the foregone revenue was due to smuggling of fuel amid the delay in the fuel marking program.
Meanwhile the DoF reiterated that it is seeking assistance from South Korea to establish an e-invoicing system within the next two years.
“We’d rather have these measures properly than rush and have it not work. So we want the procurement done properly. We want the trust receipts prepared better, we want the invoicing and studied better rather than rushed, collecting some, and not sustaining it,” said Mr. Chua. — Elijah Joseph C. Tubayan