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Filipino Finance Ministry Seeks Holistic Tax Rethink

by Mary Swire,, Hong Kong

13 November 2015

Reforming outdated tax laws would give the country a competitive edge in the region, the Philippines Department of Finance has said.

In a statement released on November 9, 2015, the Department said that it "is, and always has been, in favor of reforming the tax system. The question is whether we should go for real, comprehensive tax reform, or address the issue in a piecemeal and politically charged manner that can only stunt the momentum of development. This is because eroding revenue without making up for lost ground in fiscal space threatens Government's ability [to] deploy basic services in pursuit of the inclusive growth agenda."

According to the statement, "the underpinning policy weakness that causes a narrow tax base and low compliance rate are the very restrictive bank secrecy laws that weaken the Bureau of Internal Revenue's (BIR's) capacity to carry out its mandate…Further, the Philippines also has one of the lowest tax efficiency rates in the world because of structural factors which impede tax administration. Therefore, legislators who say that we have one of the highest tax rates in ASEAN irresponsibly paint an incomplete picture."

Finance Secretary Cesar V. Purisima said: "The Philippines has achieved much over the past five years, and much of this has been the product of responsible, balanced, and good governance. I repeat: our country's story of change is an ongoing process in a continuum. While we have come far, we cannot mistake our gains for having reached the finish line. I have always believed that a reform of our tax laws is long due."

"But I believe in true tax reform: one that does not look at certain, popular aspects in isolation without making hard choices to sustain our momentum and secure our future. Shortsighted policies short-sell the Filipino people in the long run: I think history will be kind to statesmen who are courageous enough to pass genuine tax reform," he added.

BIR Commissioner Kim Jacinto Henares pointed out: "We cannot take a reductionist or simplistic approach to tax reform. It is easy to cut taxes, and if we only look at this as a simple yes or no question, who wouldn't want to? But we must be more fiscally responsible and ask the right questions in making our effort at tax reform a balanced one, for the sake of those whom we pass this country on to. Funding our future works is like an equation: diminishing one aspect is only fine if we strengthen another."

The statement concludes: "A hurried tax reform plan, absent the necessary transformation of our restrictive bank secrecy laws, and done with undue haste during the frenzy of elections, would be a grave disservice to our people. We call on the proponents of tax reform to go beyond political convenience. We call on them and the Filipino public to support bank secrecy reform as a prerequisite and pillar of any proposed tax reform plan."

TAGS: individuals | compliance | Finance | tax | business | tax compliance | law | Philippines | enforcement | ministry of finance | tax planning | tax rates | tax reform | regulation | trade | individual income tax | services

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