THE BusinessMirror recently published a news item focusing on the country’s efficiency in collecting taxes. It said the efforts of our tax collectors continue to languish in levels far below that typically reported by peers in the region. Tax effort, which represents the government’s efficiency in collecting taxes, remains wanting among our revenue officials.
The Department of Finance (DOF) conceded that our tax efforts are inferior to those of other countries monitored by the International Monetary Fund (IMF). From January to November 2015, the DOF reported a tax-effort ratio of only 13.72 percent. No wonder the IMF has to prod our fiscal authorities to get the Filipino taxpaying public more conscious of their civic duties.
Total revenues collected by the government at the end of November 2015 hit P1.67 trillion, up 7.2 percent from P1.56 trillion reported in the same period in 2014. But the bulk of this amount came from the Bureau of Internal Revenue, which contributed P1.33 trillion. Seeing these figures, we can say the Bureau of Customs greatly disappoints.
In various articles published by the BusinessMirror, our resident tax advocates have discussed the need to rationalize our outdated and overly burdensome tax rates. They pointed out that tax compliance in this country is costly, and there’s a pressing need to refashion and trim the bureaucracy.
Our tax administrators can start their tax-collection efficiency campaign by reviewing government records, which show that 60 percent of professionals and 70 percent of entrepreneurs do not pay their tax dues. Only the fixed-income earners—the salary people—are the ones with 100-percent compliance. Some big companies and rich businesspeople who have the money to pay lawyers and tax experts continue to exploit the loopholes in our tax laws.
Now comes the much talked-about Asean economic integration, which promises to transform the region into an economic powerhouse. If our government wants to maximize the opportunities that a single Asean market may bring, it needs to overhaul our tax system soon. This is one good way to make the Philippines more competitive in the region and more attractive to foreign investors.
Among Asean members, the Philippines currently has the second to the highest individual income-tax rate at 32 percent, next to Vietnam’s 35 percent. We have the highest corporate income-tax (CIT) rate at 30 percent, while Singapore has the lowest CIT rate at 17 percent. We also have the highest indirect tax in the form of value-added taxes.
The government needs to review other tax schemes, such as withholding- tax rates on dividends, interest income and royalty. It needs to align revenue policies along the single Asean market blueprint, which advocates free flow of trade and capital.
On top of these needed reforms, government must make it easy and convenient for everybody to pay taxes. There’s a need to put a premium on ethical business practices, and government must provide incentives to promote honesty in doing business in our country. We need to address not only tax evasion, but also corruption both in government and the business sector.
Image credits: Jimbo Albano
1 comment
TAX BREAK FOR SALARY WORKERS NOW!!!! OVERHAUL THE OUTDATED AND BURDENSOME TAX SYSTEM!!!