Government suffers heavy revenue loss on underground economy

MANILA, Philippines – The Bureau of Internal Revenue (BIR) is losing roughly 35 percent in potential revenues because of the existence of the so-called underground economy and other tax evaders, a ranking Department of Finance official said over the weekend.

Finance Undersecretary Gil Beltran said the size of tax evasion is largely due to how much of the economy is underground.

“You cannot really collect 100 percent taxes in an economy where 35 to 40 percent are underground. It is impossible. No country, even from the West, nobody collects 100 percent taxes,” he said.

Nevertheless, Beltran said the government has put in place measures seeking to address these problems.

These measures include tax audit and the use of third-party information to verify data submitted by taxpayers.

The BIR also taps other government agencies to reconcile information and tax returns submitted by taxpayers.

“We have started cross matching the data of the BIR with those of local government units. About 30,000 taxpayers are inactive and not paying the BIR,” Beltran noted.

The BIR is tasked to collect P798.5 billion this year, adjusted downward from the previous program of P850 billion. For next year, the BIR is tasked to collect P875.1 billion.

The agency has been missing its monthly targets in recent months due to poor economic conditions but for the month of June, preliminary data showed the BIR collected P56 billion or P3 billion more than the target of P53 billion for the month.

Unlike the BIR, the Bureau of Customs (BOC) has been collecting more or reaching 90 to 95 percent of its potential revenues despite weakening imports, Beltran said.

“In the first five months, they were able to collect P20 billion more than what was expected from them,” he said.

However, for the month of June, the BOC failed to meet its target of P25.9 billion mainly due to the decline in imports. The agency has yet to release the actual collection figures for June.

The Development Budget Coordination Committee (DBCC), the interagency group that sets the country’s macroeconomic assumptions, has set a deficit ceiling of P250 billion for 2009, revised from a previous program of P199.2 billion, because of lower revenues.

The DBCC also revised economic growth for 2009 to a range of 0.8 percent to 1.8 percent from the previous forecast range of 3.1 percent to 4.1 percent. –Iris C. Gonzales, Philippine Star