The government’s tax effort dropped 0.29 percentage point to 13 percent of the gross domestic product in the first quarter on lower oil revenues, the Finance Department said Tuesday.
Tax effort, which represents the ratio between the state’s collection and the whole economy, declined from 13.29 percent of GDP registered in the same period last year.
Finance undersecretary and chief economist Gil Beltran said in an internal economic bulletin the tax effort declined due to the continued downtrend in oil revenues.
Beltran said if the effects of the oil and rice taxes were to be excluded, tax effort would likely rise by 0.02 percentage point.
Beltran said the pale revenue collection also pulled downward the revenue effort to 14.66 percent of GDP in the first quarter from 15.49 percent of GDP a year ago.
“Revenue effort slid 0.83 percentage point. Excluding oil and rice taxes, revenue effort would have risen by 0.04 percentage points,” Beltran said.
Data from the Finance Department showed government revenues in the first quarter grew 1.8 percent year-on-year to P479 billion and fell 17 percent short of the P573.7-billion target for the period. GDP grew faster at 6.9 percent in the January-March period.
Beltran said expenditure effort inched up by 1.5 percentage point to 18.1 percent of GDP in the quarter from 16.6 percent in the first quarter of 2015.
“The expenditure effort rose by 1.5 percentage points to 18.1 percent, boosting GDP growth by that magnitude,” Beltran said.
“A large bulk of the expenditure growth went to capital outlays which rose 39.9 percent in real terms in the first quarter,” Beltran said.
Weak revenues and robust expenditures resulted in a budget deficit representing 3.44 percent of GDP in the first quarter, exceeding the target.
“NG deficit exceeded the benchmark 2-percent of the economy,” Beltran said.
Government spending rose 17.3 percent to P591.5 billion in the first quarter from P504 billion in the same period in 2015.
“Expenditures grew by 17.3 percent, also exceeding GDP growth. The more robust expenditure growth with improved project implementation led to the rise in the NG deficit to P112.5 billion from the P33.5 billion in the previous year,” Beltran said.
The national government plans to raise the tax effort as a percentage of the economy to 16.6 percent this year.
Meanwhile, debt-to-GDP ratio improved to 44.3 percent as end-March from 44.7 percent recorded in the same period last year.
“Debt management measures led to the continuing drop in the debt-to-GDP ratio as of March 2016,” Beltran said.