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Country Rankings - Philippines

  • Oct 10, 2017   Philippines : disentangles

    I think the key lesson to be learned from the evolution of taxation over the last 100 years or so is that it is very easy to add to tax codes, but quite difficult to subtract from them. We find this happening all over the world. Indeed, a bit like Victor Frankenstein, some countries have unwittingly gone and created some monster tax codes, and in many places they seemingly refuse to be tamed. Just look what's happened in the Philippines: its system of tax incentives grew so complicated that it actually deterred foreign investors. And the Philippines is far from alone in this respect. You might as well start calling them tax disincentives. The Philippines does manage to redeem itself somewhat this week, with parliament expected to soon approve a long-awaited personal income tax and value-added tax reform bill. This is the first stage of a three-phase tax reform that will see those tax (dis)incentives tackled next year, if all goes to plan.
    Source: https://www.tax-news.com/news/Philippines_Set_To_Enact_Tax_Reform_Bill_By_YearEnd____75424.html

  • Mar 08, 2017   Philippines : optimistic

    Things are looking more optimistic for the Philippines however, which is hopeful that a tax reform program will be completed by 2018. However, hope is the key word here, for I wouldn't hold your breath for a dramatic improvement in this country's tax environment. In fact, the scale of tax task is daunting. The Philippines finds itself languishing in 115th place in the global Paying Taxes index, with a tax incentive system so complex that it actually deters companies from the Philippines rather than encouraging them to invest there. And don't take just my word for it. The head of the Bureau of Internal Revenue said so herself in a seminar in New York not so long ago. And last year Finance Department spokesperson Paola Alvarez said that the Philippines and Thailand collect the same amount in VAT revenues, even though the VAT rate in the Philippines (population 102m) is 12 percent and Thailand's (population 68m) is seven percent. This, he said, "demonstrates the gross inefficiency of our system." Problems associated with tax inefficiency, a narrow tax base, and complexity seem to plague the tax regimes of emerging economies like the Philippines. Still, at least in this case, the problem has been recognized and acknowledged, which is half the battle won.
    Source: http://www.tax-news.com/news/Philippines_Hopes_To_Have_Overhauled_Tax_Code_By_2018____73568.html

  • Aug 23, 2016   Philippines : learns

    There is a theory, usually expounded by free marketeers, that governments, and societies at large, benefit from tax cuts because: taxpayers are less inclined to find ways to avoid tax and therefore the government collects more revenue; more revenue for the government means more can be spent on public services; and a lower tax burden means people have more disposable income to spend, and businesses have more money to invest. In other words, everyone's a winner! But has the theory been tested in the real world? I suppose you could say that it holds true to some extent. Look at the countries that enjoyed stellar rates of economic growth prior to the last financial crisis. They tended to be low-tax economies like Singapore, the United Arab Emirates, and Ireland. Many high-tax economies, particularly in Europe, barely registered a blip on the growth radar, and are still suffering hangovers from the crash – it's surely no coincidence that Europe's fastest growing economy is Ireland once again. So why don't high-tax countries ever learn the lessons of their less heavily taxed brethren? Well, it's probably because the real world is complex, and so are taxes. Governments must of course ensure that they collect enough revenue to cover spending, and obviously the more a government spends, the more revenue it needs. But I wonder just how much the cost of tax complexity is factored in to tax rates. As I noted in this column recently, if the United States eliminated the USD1 trillion it spends on "tax expenditures" – credits, deductions, exemptions, etc. – it could slash corporate tax from 35 percent to 21 percent and still collect the same amount of revenue, according to the Center for American Progress. This is purely hypothetical of course, because it's a theory that's unlikely ever to be put to the test. But at least one country is attempting to put it into practice. Instead of hiking VAT by three percent, as proposed in the 2016 Budget, budget negotiators in the Philippines have agreed to maintain VAT at a relatively low 12 percent, and just make the thing more efficient. And I congratulate them for it.
    Source: http://www.tax-news.com/news/Philippines_Rules_Out_VAT_Hike_In_Budget____71988.html

  • Jul 26, 2016   Philippines : tedious

    Moving on, many a government has promised to simplify and reform their country's nightmarish tax code, only to fail to deliver before its time is up. But just because this happens a lot does not lessen the severity of the crime in my book. So when a government fails to deliver, it deserves to be called out. And this week's villain of the piece is the Philippines, where businesses have once again been imploring the Government to reform the nation's dysfunctional tax system. For its part the Government has frequently assured taxpayers that it is committed to tax reform. But commitment and action are not the same thing. And the lack of action is now showing. The Philippines ranked a miserable 126th out of 180 countries in PwC's Paying Taxes Index 2016. This index tells us that companies have to make 36 separate tax payments, a process taking an average of 193 hours per year. What's more, the Philippines' spaghetti bowl of tax incentives has now become so complicated that they are more likely to deter investors than encourage them, involving as it does more than 200 special laws and more than a dozen investment promotion agencies. And don't take it just from me. The former head of the Philippines' own tax authority, Kim Jacinto-Henares, told a conference in New York last year that the country is failing to attract any new investments as a result of this confusing system of incentives. Filipino Senator Francis Escudero summed the situation up quite well in response to the Philippines' dismal Paying Taxes ranking last October, when he observed that "it's even easier to pay taxes in Iraq, Iran, and Afghanistan. What does that say about us?" However, he needed just one word to encapsulate investors' feelings towards the country's tax system: "tedious."
    Source: http://www.tax-news.com/news/Filipino_Businesses_Call_For_Tax_Reform____71760.html

  • Nov 16, 2015   Philippines : saccharine

    Tax revenue also seems to be preoccupying the Government of the Philippines too. President Aquino is steadfastly refusing to give in to the demands of certain legislators and cut the country's uncompetitive taxes. The fear is that such a course will deplete the coffers and cause a loss of confidence in the country's ability to manage its finances. And it is in such situations that Government's start to get greedy. And appropriately enough, the country's proposed tax on sugary drinks, designed to tackle obesity and other health problems, is just such an example. I'm not sure whether taxing sugar or fat or other stuff that makes certain foods so unhealthy works. A lot of countries seem to think that it's the way to go, but there is not much evidence to suggest that sugar taxes influence consumers, pushing them towards healthier dietary choices. Perhaps if "fat tax" revenues were 100 percent ploughed back into health initiatives directed towards prevention of diseases related to poor diet, things might change. But in most cases, they are probably not. In the Philippines, only 20 percent of the expected USD730m in revenue from the sugar tax will be allocated to health schemes. Half of it will disappear into the Government's bank account, to be spent on who knows what. The tax might do some good, but ultimately it's more a revenue raiser than a life-saver.
    Source: http://www.tax-news.com/news/Filipino_Lawmakers_Approve_Sugary_Drinks_Tax____69683.html

  • Sep 18, 2014   Philippines : a helping hand

    We all know that small businesses are the life-blood of most economies. Large companies are of course important too in terms of the number of people they employ and the amount of taxes they pay into the system through profit and employment taxes. But large companies typically only constitute about 10 percent of the overall total of active businesses in an economy. Yet starting a company from scratch is still fraught with risk, and few successful entrepreneurs will get things right first time around. It is also a sad fact that while many governments claim to be on the side of the small business woman, they are often the ones preventing them from growing through unrealistic regulatory requirements and tax demands. Cash flow is vital in the early stages of a business, but too often it is absorbed by taxes. Lots of governments allow start-ups and small businesses to pay lower rates of income tax, but the Philippines could go a welcome step further with proposals to abolish national and local taxes for start-ups for the first two years of their life. Doubtless the Philippines Bureau of Internal Revenue is hoping the parliamentary bill is defeated. The Philippines is trying to raise its tax-to-GDP ratio and the Revenue is under pressure to collect more in tax from its citizens and businesses rather than less. But over the long-term surely this scheme will help rather than hinder these goals. If more businesses survive the crucial early stages of their existence, higher numbers than usual will go on to be profitable and pay taxes. Unfortunately, few governments have the courage to look long-term these days.
    Source: www.tax-news.com/news/House_Bill_Seeks_Philippines_StartUp_Tax_Exemption____65790.html

  • May 27, 2014   Philippines : getting something right

    A re-run of the classic tax western is taking place in the Philippines, in which the bad guys want to raise taxes in all directions while the good guy (Ronald Reagan?) believes that reducing tax rates will result in more tax being paid. The part of the Gipper is being played by Juan Edgardo "Sonny" Angara, who wants to cut the country's 30 percent corporate tax rate (the highest in South-East Asia), while tax professionals gasp with horror, needless to say. Well, how's about some facts? In April, the Philippines Department of Finance disclosed a 26 percent rise in collections of import duties, taxes and fees in the first quarter of the year. In money terms that's equivalent to USD500m (USD2bn annualized), while our hero predicts a loss of just USD160m in corporate tax receipts in the first year of his rate reduction program. Last year there was a primary surplus, and the full deficit was just 1.4 percent of GDP, less than forecast. The increase in customs collections is probably mostly due to the so-called "sin tax" package, whose main component was a quite savage increase in excise taxes on locally-produced hooch, forced on the country by the WTO after a long battle to level the playing field with over-taxed alcohol imports. That's to say, the increase is no flash in the pan, but is likely to be permanent. The one thing the tax-increasers have on their side, sort of, is that total tax collections amounted to 13.4 percent of GDP last year, up from 12.9 percent in 2012, due to a combination of increased collection efficiency and those sin tax increases. This is one of the lowest percentage figures in the region, or anywhere, and as in other less-developed countries such as Pakistan it is due to the fact that tax-paying is largely voluntary for the professional classes. The President, the benign Benigno Aquino, has set his face against mainstream tax increases, and is waging war against corruption. This seems to be exactly the medicine that is required and is already paying dividends. So we are on the side of the good guys: cut tax rates, root out corruption, and turn a deaf ear to the IMF. To set the Philippines' 13 percent tax take into perspective, let's look at a report from the IMF's Terrible Twin, the OECD, "advising African nations on how to boost their tax revenue collections to foster sustainable development." The OECD says that low-income African countries score an average tax take of 16.8 percent of GDP, while middle-income countries score 19.9 percent, and upper-middle income African countries score 34.4 percent, "close to the OECD average of 35 percent." Now here's the kicker: the United Nations considers that 20 percent is the minimum that allows a country to achieve its Millennium Development Goals, including the eradication of extreme poverty. My question is obvious: what connection has the level of tax collections got with poverty? Here are some basic, incontestable statements: Taking money from people makes them poorer, not richer; Money taken by African governments (and others) is mostly stolen or misspent on agendas that have nothing whatsoever to do with the wellbeing of poor people; The way to help poor people get richer is to get government off their backs and encourage them to be entrepreneurial. I am not crass enough to suggest that there were no deserving poor people in the UK or the US in 1910, but let us remember that the governmental tax take in these two countries at that time was 11 percent and 9 percent respectively, and they were the two richest countries in the world. It is an outrage of the first magnitude for these teams of fat-bellied, ignorant, arrogant officials from the IMF, the OECD and the United Nations to prance about the world on their expense accounts telling finance ministers to steal even more money from the poor. The very best thing to do for the poor would be to abolish all of these excrescences right now and force their staff to get jobs in the real world where they might just be able to contribute something useful to the human weal.
    Source: http://www.tax-news.com/news/Philippines_Senate_Looks_For_Lower_Corporate_Tax_Rates____64763.html

  • Oct 03, 2013   Philippines : e-progress

    There are encouraging signs of modernity from the Philippines, which is taking real steps towards creating a joined-up, electronic tax filing and collection system. We have had occasion to berate the Filipinos for such inanities as their official, printed VAT invoice requirement for the sale of a single drawing pin, and their cack-handed system of airline taxation which has decimated the tourist business; but in general the country seems to be making modest progress away from its disreputable past. President Benigno Aquino said there would be no new taxes on his watch, and he seems to have stuck to that pledge so far. He has cracked down on corruption, and the economy is firing on at least some cylinders, with 6.8 percent GDP growth last year, and 7.6 percent in the first half of 2013. The IMF says that more taxes should be raised; this is something it always says, whatever the circumstances, even when addressing near-dead European basket-cases, but in this particular case it is right, since the Philippines is one of those countries, like Pakistan and Mexico, where only a tiny proportion of the economically successful pay taxes.
    Source: www.lowtax.net/asp/story/front/Online_Income_Tax_Filing_In_Philippines_By_2014____62138.html

  • Sep 05, 2013   Philippines : and quill pens

    For those readers who do business in the cloud – probably most, by now – it is commonplace to read commentaries on the difficulties tax authorities face in coming up with satisfactory models for taxing on-line business. And when organizations like the IRS and Britain's HMRC attempt to implement complex IT solutions even to relatively earth-bound activities, the result is often chaos. In a word, the tax collectors are challenged by IT, and the cloudier things get, the more challenged they become. But some tax authorities are more at sea than others, and for an example of how bad it can get, the UK and US Treasury departments can console themselves with the sight of the Philippines BIR (Bureau of Internal Revenue), which has just grandly announced that it will "start collecting taxes from individuals and businesses selling products online." OK, but there's just one problem, which is that the BIR is firmly stuck in the 20th century, if not the 19th, from an IT perspective, and is hamstrung by a system of "official invoices." In 1880 it must have seemed a good idea to require businesses to use official forms to conduct sales operations; apart from being a nice little earner in itself (you have to buy the forms), it makes sales taxes (and now VAT) easy to administer. The Philippines is far from being the only country to persist with this antediluvian practice, but when it comes to e-commerce, it is simply madness. An on-line trader must register with the BIR, fair enough, but how many will do so when the consequence is that you buy yourself a nice little pad of pre-printed, numbered forms to issue to your clients when you sell things? Oh, OK, there's a de minimis exception, that's OK then. Except that it is equivalent to 57 US cents, well below the minimum amount for which the customer can use a credit card. And you can't buy an awful lot for 57 cents, even in the most tenuous of clouds. I quote: "Online sellers will also need to withhold the required creditable/expanded withholding tax, final tax, tax on compensation of employees, and other withholding taxes, and remit the revenue collected to the BIR, having issued to their customers the necessary Certificate of Tax Withheld." If you don't do it, then of course they lock you up and throw away the keys. Please, gentlemen, please, please grow up!
    Source: www.lowtax.net/asp/story/front/Philippines_To_Collect_Taxes_From_Online_Sellers____61838.html

  • Jun 13, 2013   Philippines : gone bonkers

    Beginning the negative section of the column under the heading of "silly" we have the Philippines indulging in a piece of top-down bureaucratic craziness which will be as ineffective as it is irksome. There is a – widely ignored – system of "official receipts" (ORs) which have to be issued in respect of every transaction worth more than – wait for it – sixty US cents – yes, you can believe your eyes – and needless to say there there is a thriving black market in ORs, many of which date back to the 1970s, since it is the ORs, and only the ORs, which entitle you to an income tax deduction. I think I've got it right. Anyway, they should simply scrap the whole lunatic system and allow normal commercial practices to take over instead, as is the case almost everywhere else in the world, instead of which, yes, they are scrapping the system, but only to reinvent it with a whole new batch of replacement ORs. The only people who benefit from the existing system are the golden boys who have official permits to print ORs: while in say France or Russia it's the notaries whose palaces line the streets of the capital, in the Philippines it must be these printer guys and gals who have the palaces. If you could get to the truth, you'd probably find that the biggest of them is married to a sister of someone high up in the tax department. There has to be an explanation!
    Source: www.lowtax.net/asp/story/front/Philippines_Insists_On_Official_Receipt_Tax_Compliance____61005.html

  • Mar 14, 2013   Philippines : sees the light

    Better late than never, the Philippines has abandoned its Common Carrier Tax, which has been crucifying the country's tourist industry. Airlines will start flying again to the Philippines, and the Government will make much more from visitors' purchases than it does from CCT, which has been reaping less and less as airlines simply crossed Manila off their schedules. Lots of countries tax air travel, under the pretence of saving the environment, and these taxes are usually self-defeating. Island nations calculate that people will have to pay the tax because they can't swim to an adjoining country to catch their planes, but people can and do take short hop flights to a hub which doesn't tax their long-haul flights; or in the case of the UK, they catch the Eurostar to Paris and fly from there.
    Source: www.lowtax.net/asp/story/front/Philippines_Scraps_International_Airlines_Tax____60059.html

  • Feb 07, 2013   Philippines : obeys

    Also nearby, and not quite without its own cross-border disputes, the Philippines has shown itself a good world citizen with its submission to WTO requirements on alcohol taxation. There was a certain amount of foot-dragging, it's true; and one could ask why the Philippines had to be dragged reluctantly before the WTO in the first place, but at least it has accepted the inevitable with good grace, unlike some larger countries I won't mention, to spare their blushes. In fact the Philippines is under generally good management at present, with President Benigno Aquino and what seems to be a competent finance team. This is a happy contrast to some previous incumbents; don't those shoes seem a long time ago? Hardly the same country, although we must not forget that Benigno's politician father was assassinated, probably at the behest of the Marcos regime, and that his mother then became President. So he is not exactly an outsider. The Philippines is the 12th most populous nation, worldwide, and its adoption of the English language (thank you, America) gives it a leg up in the world, although that is also presumably the reason for the 12 million diaspora Filipinos, many working as maids for sometimes harsh and ungrateful foreign masters. Although when I am in Cyprus, I see them gathering in the parks on Sunday, their day off, twittering away happily.
    Source: http://www.lowtax.net/asp/story/front/Philippines_Confirms_Compliance_In_WTO_Booze_Dispute____59513.html

  • May 31, 2012   Philippines : takes off a tax

    Like the UK, the Philippines, another island nation, may not have had too much choice when it decided to remove the tax on airline turnover, which had caused every single airline to abandon its direct long-haul flights from the Philippines. Unlike air ticket taxes, this one bears on the airlines and not their customers. So people end up having to take a shortish hop to say Hong Kong and then fly on to London or New York. So far the bill has just passed the House of Representatives, but it's a racing certainty that it will go the whole way.
    Source: http://www.lowtax.net/asp/story/front/Philippines_Parliament_Approves_Removal_Of_Airline_Taxes____55651.html

  • May 17, 2012   Philippines : accepts a WTO ruling

    Perhaps I shouldn't be complimenting the Philippines on increasing 'sin' taxes; but that blooper is outweighed by the fact that they have put a difficult WTO ruling into effect within a matter of weeks, equalizing the taxation of local hooch with imported spirits, something which must have been fiercely resisted by local distilleries, but which will offer much improved choice to citizens. No chance of Scotland doing that, of course, and if it was an independent country it would be getting a severe black mark for its repressive intention to put a minimum floor under booze prices.
    Source: http://www.lowtax.net/asp/story/front/Parliamentary_Committee_Approves_Philippines_Sin_Tax_Reform____55378.html


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