Philippines’ Finance Secretary Recommends 7 Percent Corporate Income Tax Cut
The Philippines’ Finance Secretary, Carlo Dominguez, has recommended a corporate income tax rate of 25 percent, reduced from the current 32 percent.
The proposal would be implemented as part of the Government’s Comprehensive Tax Reform Program (CTRP). Dominguez made the announcement at the 5th Manila Times Business Forum in Davao last Friday.
Dominguez’s language was bullish: “We are going to do that not only because it was a campaign promise, but more importantly, because it makes good economic sense.”
Several other measures are included in the CTRP bill, which is pending in congress, including the adjustment of excise duties on fuel and automobiles as well as the expansion of the VAT base. Dominguez was also critical of the size of the current tax net, saying that the country only had a large taxpayer base of “about 3,000 individuals and corporate companies” in a population of about 100 million, and that “tax collection remained one of the lowest in Asia.”
Dominguez pointed out that the massive investment program planned by the government requires serious tax reform to fund it. The minister estimated this program would require US$18 billion over the mid- term, equivalent to about three years of the country’s GDP revenues. Dominguez expects the government to raise these funds by widening the tax base, as well as the VAT base.
Aside from tax reform, the country’s economy is set for between 6.5 to 7.5 percent GDP growth during 2017. This growth is mainly a result of infrastructure projects.
The Philippines economy achieved a 7 percent GDP growth rate in the first three quarters of 2016, hitting the upper end of the government’s official target of 6 percent to 7 percent. This was faster than growth rates inChina, Vietnam, Indonesia, and Malaysia. In addition to infrastructure spending, foreign investment in the BPO services sector has been on a high upward growth curve, in addition to textiles and furniture manufacturing.
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