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Southeast Asian countries have recently made advancements towards expanding their tax bases but further effort is needed, says a new report from the OECD.
Levels of tax revenues among the six Asian countries ranged from 12.2 percent of gross domestic product in Indonesia to 32 percent in Japan in 2014. The tax-to-GDP ratio in Japan, Korea, the Philippines, and Singapore increased while it decreased slightly in Indonesia and Malaysia in 2014.
The report, which includes Singapore for the first time, shows that the tax-to-GDP ratios in all six Asian countries are lower than the OECD average of 34.2 percent, especially in emerging Southeast Asian economies, where the OECD said scope for increased tax mobilization remains.
The report says that corporate income taxes are a significant source of tax revenue in all six countries. The share of corporate income taxes as a percentage of total tax revenues in all six countries was higher than the OECD average of 8.8 percent. It ranged from 12.8 percent in Korea to 52.6 percent in Malaysia in 2014, although in each country the share was lower than in 2013. In contrast, the share of value-added tax to total tax revenues in 2014 remains lower than the OECD average of 20 percent in all countries - due to generally lower VAT rates - except for Indonesia where the share was 32 percent.
In addition, a special feature of the report discusses the development of large taxpayer offices in tax administrations in Asian and Pacific countries that increasingly have adopted segmented approaches to tax administration to better mobilize tax revenue from large companies and manage their complex tax matters. For example, in the Philippines, the Bureau of Internal Revenue (BIR) stepped up the monitoring of large taxpayers and took measures to address compliance issues in 2015. In Indonesia the Foreign Enterprise and Individual Tax Office was strengthened to better manage all tax matters relating to foreign-owned firms and individual taxpayers.
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