Philippine Senators Seek Increase In Corporate Tax

by Mary Swire, Tax-News.com, Hong Kong

15 April 2005

The Philippine Senate has approved new tax proposals raising the rate of corporate income tax and removing value added tax exemptions for a number of industries and professions, as the government attempts to shore up its finances.

If enacted, the Senate's measures will see the corporate tax rate increase to 35% from 32% over a period of four years, while VAT will be imposed on private power companies, petroleum manufacturers and importers, co-operatives, doctors and lawyers, among other groups.

The result of the Senate vote will mean that negotiations will be required with the House of Representatives, which has approved an alternative revenue raising plan that calls for a 2% VAT increase across the board, with current VAT exemptions remaining intact and corporate tax rates frozen.

The government of President Gloria Arroyo is seeking to raise an additional 80 billion pesos (US$1.47 billion) to bridge its growing fiscal shortfall.

Eight tax measures were initially proposed to achieve this goal, although only two have been passed, while four have been shelved.

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