Philippines Expands E-filing of Tax Returns, Mulls Personal Income Tax Reduction

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Over the past year, the Philippines has been making great strides in improving its business environment. Chief among these improvements has been the government’s efforts to simplify the country’s tax system. The Southeast Asian nation is now continuing its efforts to improve the system of e-filing tax returns and the promotion of its use by businesses throughout the country.

In February of this year, in order to make filing tax returns simpler and encourage more tax compliance from taxpayers, the Bureau of Internal Revenue (BIR) announced that it had expanded the number of taxpayers who must now use e-filing to pay their taxes. Taxpayers would now have to enroll, file returns, and pay taxes early using the BIR Electronic Filing and Payment (eFPS) System or use electronic BIR Forms (eBIRforms).

While the initial implementation met with some success, business groups in the Philippines raised a number of problems with the country’s tax system, primarily focusing on the Tax Incentives Management and Transparency Act. Chief among the issues raised by the groups were the unclear requirements relating to the method of electronic filing of income tax returns. Thus the government has been engaged on a path of continuous improvement of the system.

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Chief among the recent improvements has been the substitution of the BIR’s older eFPS e-filing and payment system with the upgraded eBIRForms system and e-mailing returns. Following these changes has been the introduction, on June 8, of the eBIRForms Version 5, a more “streamlined” e-filing solution. The benefits of the new system include:

  • Verification steps for key taxpayer information
  • Improved security and encryption
  • The removal of bandwidth issues
  • A 90 percent reduction in the file size on the BIR server

Philippine Finance Secretary Cesar Purisima has hailed the new e-filing system’s success, saying, “There is much work to be done in improving the systems employed, but the direction of our e-filing framework has already increased transparency, accountability, and government efficiency.”

Personal Income Tax (PIT)

The Chairman of the Philippines’ Senate Ways and Means Committee, Sonny Angara, has called upon the country’s president, Benigno Aquino III, to lower the rates on personal income tax (PIT). Mr. Angara has already authored a bill calling for lower tax rates. If implemented, the lowered rates are expected to be a boon for low and middle-income earners.

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At 32 percent, the Philippines currently has one of the highest PIT rates in the ASEAN region. Only Vietnam and Thailand have higher rates, both at 35 percent. The top PIT rate in the Philippines begins to be levied on taxpayers once they earn over PHP500,000 (~US$11,031) per year.

In a public statement, Mr. Angara was quoted as saying “We need to think ahead and be competitive in the region but, more importantly, we must give the Filipino people a break…the Department of Finance has already expressed its openness to review and amend the tax rates and brackets, and we welcome this progress.”


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