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Philippines: Government loses P300 billion revenue yearly from tax perks
MANILA, Philippines — Income tax holidays and other perks enjoyed by large corporations cost the government over P300 billion in foregone revenue annually, according to the Department of Finance (DOF).
Citing data gathered from the Tax Incentives Management and Transparency Act (TIMTA), Finance Undersecretary Karl Kendrick Chua said the government lost P301.22 billion in revenue in 2015 due to the grant of tax incentives and other exemptions to some industries.
This, Chua said, accounted for about two percent of the country’s gross domestic product during the period.
He also pointed out this does not yet include exemptions from the payment of local business taxes and estimates on tax leakages in 2015.
Broken down, Chua said income tax holidays accounted for P53.77 billion of the foregone revenue, while special rates resulted in losses amounting to P32.48 billion. Exemptions on import duties also reached P18.14 billion, based on 2015 TIMTA data.
In addition, he said the government also gave away P159.82 billion in value-added tax (VAT) exemptions on imports during the period, and refunded P36.96 billion in local VAT to exporters.
“So in general, we are giving almost 0.8 percent of GDP so far on tax incentives from these income tax holidays and custom duty exemptions. Together with the VAT, it is P301 billion, or two percent of GDP. These are only the investment incentives,” Chua said.
Earlier, Chua said the government’s tax efficiency rate has suffered due to the grant of fiscal incentives and perks to various industries.
Chua said the country only has a 12.3-percent corporate income tax collection efficiency despite having one of the largest corporate income tax rates in the region at 30 percent.
He compared this to Thailand, which has a corporate income tax rate of 20 percent, but has an efficiency rate of 30.5 percent, representing 6.1 percent of its GDP.
To address these issues, the DOF said it is now preparing for the submission of the Package Two of its Comprehensive Tax Reform Program (CTRP), which focuses on the reduction of the corporate income tax while rationalizing fiscal incentives.
Source: Read more at http://beta.philstar.com/business/2018/01/12/1776830/government-loses-p300-billion-revenue-yearly-tax-perks#FOqc7EIIJ8MRQuuc.99