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Philippines Looking To Catch Up On Tax Efficiency

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

14 September 2016


The Philippines intends to address its low tax-efficiency rate, which continues to lag behind its peers, Finance Department spokesperson Paola Alvarez said.

Following on from an announcement that the Philippines will rein in tax breaks to expand the list of goods and services subject to the headline VAT rate, Alvarez pointed out that both Philippines and Thailand collect the same amount of value-added tax (VAT) revenues, even though the VAT rate in Philippines is 12 percent and Thailand's is seven percent.

"This example demonstrates the gross inefficiency of our system which we need to correct through tax reforms designed to broaden the tax base and collect more revenues," Alvarez said.

At the end of August, the Philippines announced plans to remove various VAT breaks and leave only those considered essential.

Alvarez highlighted that the Filipino VAT regime is far less efficient than other countries in the region due to the existence of about 30 exemptions for different goods and services. The only tax breaks to be maintained are certain concessions for the elderly and for food in its raw form, medicine, and education.

The nation's corporate tax efficiency is poor too; corporate tax revenues equal just 3.5 percent of gross domestic product, way below Malaysia and Singapore, at 34 percent and 24.1 percent, respectively.

TAGS: compliance | Finance | tax | business | value added tax (VAT) | tax compliance | tax incentives | law | audit | Philippines | Singapore | Thailand | ministry of finance | tax rates | Indonesia | Malaysia | United States | tax reform | trade | Vietnam

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