Thailand
Philippines corporate income tax collection lagging
Fiscal incentives have led to the Philippines recording the lowest collection efficiency in the region with regard to corporate income taxes, the Finance department claimed on Tuesday.
In a statement, the department noted that the country — which imposes the highest corporate income tax rate in the Association of Southeast Asian Nations at 30 percent — had the worst collection rate of 12 percent.
Thailand, Vietnam and Malaysia — all with lower corporate income tax rates of 20 percent, 25 percent and 24 percent, respectively — recorded respective collection efficiencies of 30.5 percent, 29.2 percent and 27.1 percent.
“So clearly, we have the classic problem of a high rate but narrow base. That is why the efficiency is problematic,” Finance Undersecretary Karl Kendrick Chua said in the statement.
“[A] flawed and outdated system that provides tax incentives to companies under 150 investment laws and 210 non-investment laws is the reason for the country’s low CIT collection efficiency,” he added.
All corporations, unless receiving fiscal incentives, have to pay a regular CIT rate of 30 percent or a minimum CIT rate of 2 percent of gross income beginning the fourth taxable year immediately following the year in which they commenced business operations, when the minimum income tax is greater than the regular tax.
The optional standard deduction is 40 percent of gross income under the Tax Code.
Chua said that in terms of revenue, domestic corporate income taxes have been increasing over time as a share of GDP and will continue to rise given the economy’s strong growth.
“However, I think this is deceiving because despite a 30 percent rate, we are at the bottom in terms of revenue efficiency,” he said.
The Finance department wants to address this by introducing Package Two of the government’s Comprehensive Tax Reform Program, focusing on the reduction CIT rates while rationalizing fiscal incentives.
The tax will be cut to 25 percent while incentives for companies will be rationalized to make these “performance-based, targeted, time-bound and transparent,” Chua said.
The “revenue-neutral” proposal will be submitted to the House of Representatives later this month, the Finance
department said.
Source: http://www.manilatimes.net/ph-corporate-income-tax-collection-lagging/373404/