The Bureau of Internal Revenue (BIR) is targeting to increase its sales tax collection by about 40 percent this year despite the economic downturn.

In Revenue Memorandum Order 7-2009, BIR commissioner Sixto Esquivias said the government's main revenue agency is looking to increase its value-added tax (VAT) collection to P195.98 billion this year from P140.32 billion in 2008.

Last year's VAT collection was P64.6 billion short of the P204.88 billion target.

Republic Act 9337 or the Expanded Value-Added Tax Act was passed in 2005 as part of the Arroyo administration's efforts to put its fiscal house in order.

The law raised the VAT rate from 10 to 12 percent and increased the corporate income tax rate from 32 to 35 percent.

Recently, several economists have proposed reforms in the country's tax system, mainly the increase in the VAT rate from 12 to 15 percent, to allow the government to continue with its fiscal stimulus program next year.

The government is targeting P1.153 trillion in tax collections this year, a hefty P85 billion decrease from the P1.238 trillion goal previously.

The BIR alone is expected to generate P865.5 billion in revenues, P45.2 billion lower than the earlier target of P910.8 billion.

If the country fails to meet its tax collection target and sell some assets, its budget deficit could widen to as much as P257 billion in 2009, economic planning chief Ralph Recto said earlier.

The Philippines set its deficit ceiling for this year at P177.2 or 2.2 percent of gross domestic product (GDP), but is now mulling to raise this to P184 billion as the economy slows further.

In 2008, the budget gap swelled to P68.1 billion or 0.9 percent of GDP from only P12.4 billion or 0.2 percent of GDP in 2007 after the domestic output slackened to 4.6 percent from a 31-year peak of 7.2 percent.

The National Economic Development Authority has scaled down anew the country's GDP growth target to a range of 3.1 to 4.1 percent from the earlier revised range of 3.7 to 4.4 percent due to the global economic meltdown.