Philippines Senate Looks For Lower Corporate Tax Rates

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

23 May 2014

The Philippines Senate Ways and Means Committee has begun consideration of a bill proposed by its Chairman, Juan Edgardo "Sonny" Angara, which would cut the country's 30 percent corporate income tax rate.

It was said that the Philippines, whose corporate income tax is the highest among the Association of Southeast Asian Nations (ASEAN) countries, "might be left behind in the tight race for job-creating investments if it does not follow the regional trend of reducing tax on business income."

"Thailand gradually reduced its rate from 30 percent in 2011, 23 percent in 2012, to the present 20 percent. Vietnam also lowered its corporate income tax rate from 25 percent to 22 percent this year. It will reduce it further to 20 percent in 2016," Angara added. "At present, the region's average rate is about at 23.1 percent, with Singapore as the lowest at 17 percent, and the Philippines as the highest at 30 percent."

Angara proposes to reduce corporate income tax rate to 24 percent over a three-year period, by way of a reduction of two percent every year, "to provide room for transition and buffer revenue impact."

He predicted a projected tax revenue loss of PHP7bn (USD160m) in the first year, but that collections would eventually rebound in succeeding years. He emphasized that "the offset will come in the form of making the Philippines an attractive investment haven which in turn would widen the tax base, increase economic activities, and create tax-paying employment."

However, a recent paper by the Senate Tax Study and Research Office, Direct Taxes Branch, has asked if the country can currently afford to lose tax revenue by way of a corporate tax rate reduction "given the budgetary deficit, which in 2013 was pegged at PHP238bn, and whether government finances can be stretched further, given that the post-typhoon Yolanda rehabilitation efforts require at least PHP361bn. This amount almost eclipses the PHP363bn the Bureau of Internal Revenue collected from corporate income tax in 2012."

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