By Chino S. Leyco

The tax reform for acceleration and inclusion (TRAIN) law failed to deliver to the expected revenues in the first eight months of the year after collections from consumption levy incurred losses instead of income.

Based on a document presented during the inter-agency Development Budget Coordination Committee (DBCC) meeting last week, the Department of Finance (DOF) reported that TRAIN registered a net revenue of only P10.6 billion, below the expected collection.

According to the DOF, the TRAIN missed its January to August goal of P41 billion by 74 percent.

At end-August, TRAIN’s gross revenues amounted to P112.1 billion, but this was reduced after taking into account the P101.6-billion losses from the lowering of personal income taxes and the retention of VAT exemptions.

The DOF originally estimated that TRAIN or Republic Act No. 10963’s foregone revenue would only amount P93.1 billion during the period, coming solely from the reduction of personal income taxes.

Butt based on the DOF report, losses following the personal income tax reduction reached P88.6 billion in January to August.

What the DOF did not foresee was that the increased in the value-added tax (VAT) exemption threshold for marginal establishments from P1.5 million to P3 million would drag down TRAIN gains.

The Bureau of Internal Revenue (BIR) and the Bureau of Customs both expected a revenue gain after TRAIN supposedly “cleaned up” the VAT system by limiting its exemptions to necessities such as raw agriculture food, education, and health.

However, instead of generating additional P25.2-billion revenues after the supposed “clean up,” the national government incurred a loss of P13 billion from VAT exemptions under TRAIN.

The BIR reported to the DOF that the agency lost P13.5-billion revenues from VAT, a reversal of the DOF’s expected P11.2-billion income.

Unlike BIR, the Customs bureau, on the other hand, generated additional revenue from VAT, but significantly below its target set by the DOF. The agency raised only P500 million from consumption tax, below the expected P14 billion.

Sources said the DOF already called the attention of the BIR regarding “unexpected loss” from VAT that “shouldn’t be happening.”

At end-August, TRAIN’s excise tax collections missed the P92.1 billion target by 17 percent to P76.7 billion owing to weak revenues from petroleum, sugar sweetened beverages (SSBs), coal and cosmetic procedures. Only tobacco and automobiles exceeded targets.

DOF data showed revenues from oil excise reached P31 billion, below the P41.8 billion goal by 26 percent, while SSBs missed the P36.9 billion target by 30 percent to P24.9 billion.

Revenues from coal also missed the target by 51 percent to P600 million, instead of P1.2 billion, while excise tax on cosmetic procedures registered zero collection in January to August.

Meanwhile, higher excise on tobacco brought in additional P7.3 billion, exceeding the P2.6 billion target by 184 percent, while automobiles also breached the goal by 26 percent to P11.5 billion.

“Others,” on the other hand, raised P35.4 billion during the period, exceeding by 111 percent the P16.8 billion target, the DOF data revealed.