No New Tax Measures from the Philippines for President Aquino’s Final Year
According to recent statements from the Philippine government, the country will not be introducing any major new tax measures during President Benigno Aquino’s final year in office. However, the government will continue to search for efficiencies in the areas of tax administration and collection in order to boost tax receipts.
In particular, the government is focusing on widening the tax base and reducing tax avoidance and evasion. According to the country’s 2016 budget plan, tax revenue as a percentage of the economy will be increased to 17.5 percent from its current level of 16.3 percent. The Philippine government has been quite active this year in its efforts to improve the competitive environment of the country. Among the recent measures taken by the Philippine government in this regard are:
- Pushing for a further simplified tax system
- The expansion of e-filing of tax returns
- Issuing a number of income tax exemptions
- Signing an Intergovernmental Agreement on FATCA with the United States
While there have been a number of calls recently for the income tax to be lowered there are currently no plans to change the country’s tax rates. Past calls for a reduced rate centered on the taxes’ relatively high level and worries that they may be adding to the uncompetiveness of the country. In particular, there have been strong calls for the corporate income tax (CIT) to be cut.
Previously, a bill had been introduced, proposing the reduction of CIT from 30 percent to 25 percent, as well as increasing the minimum CIT from two percent to five percent. However, despite much popular support for the proposed measure, the Philippine government has not given its support, and the bill has continued to languish in committee.
Calls have also come from outside the Philippines for the country to improve its tax and regulatory environment. In its recent report, Revenue Statistics in Asian Countries: Trends in Indonesia, Malaysia, and the Philippines, the Organization for Economic Cooperation and Development (OECD) has urged the governments of emerging Asian economies to seek new revenue streams to make their economies more competitive and boost living standards.
Countries like the Philippines have seen their tax bases expand at slower rates compared to OECD averages. In 2013, the Philippines tax-to-GDP ratio was 16.2 percent, much lower than more developed countries in the region, such as South Korea (24.3 percent) and Japan (29.5 percent), and well below the OECD average of 34.1 percent. Additionally, in the area of CIT, 60 percent of income tax payments in the Philippines were accounted for by CIT. In comparison, in Japan and South Korea, CIT only accounted for 48 percent and 39 percent respectively.
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