Foreign groups support bill cutting income taxes

MANILA, Philippines – Foreign business groups in the Philippines are pressing the government to pass a bill that aims to reduce income taxes, saying it will help make the country more competitive with other economies in the region.

In a statement yesterday, the Joint Foreign Chambers (JFC) expressed its support for reducing personal and corporate income taxes in the Philippines as well as raising taxes on consumption in order to maintain enhanced public sector revenue inflows.

“There clearly is a pattern to reduce corporate and individual income tax rates in competing Asean economies to make their countries more competitive. The Philippines should not fall behind the regional trend,” JFC said.

According to the foreign business groups, the Philippines at present imposes the second highest personal income tax and the highest corporate income tax among the six Association of Southeast Asian Nation (Asean) member countries.

The JFC said personal income tax in the Philippines currently stands at 32 percent while the country’s corporate income tax is at 30 percent.

In comparison, personal income tax in Thailand is at 35 percent (down from 37 percent in 2010), Vietnam 35 percent, Indonesia 30 percent, Malaysia 26 percent (to be reduced to 25 percent in 2016), and Singapore 20 percent.

Meanwhile, corporate income tax in Indonesia and Malaysia are 25 percent, Vietnam 22 percent (down from 35 percent in 2010), Thailand 20 percent (reduced from 35 percent in 2010), and Singapore 17 percent.

JFC stressed the country’s current income tax rates were set in 1997 with adjustments not made frequently enough to remedy a growing inequity as more salaried workers are paying the highest tax bracket.

“Contrary to the view of some that reducing corporate and personal tax rates will decrease total revenues and lead to a deficit, JFC believes reducing these rates will increase investment and trade with higher total revenues being realized from lower corporate and personal income taxes,” the groups said.

“Achieving the goal of lower income and higher consumption taxes is a process that will take a number of years. The current administration has yet to adopt a policy to make comprehensive changes in income and consumption taxes. Its sole major tax reform has been to raise taxes on alcohol, cigarettes, and tobacco,” the groups added.

The JFC further said it is also advocating the raising of consumption taxes in parallel with reducing income taxes.

“However, we recognize that raising taxes can be unpopular and difficult to achieve close to national elections, especially the VAT, which at 12 percent is the highest of the Asean-6,” it added.

The JFC is a coalition composed of the American, Australian-New Zealand, Canadian, European, Japanese and Korean Chambers of Commerce in the Philippines as well as the Philippine Association of Multinational Companies Regional Headquarters.

The groups combined represent over 3,000 member companies engaged in over $230 billion worth of trade and some $30 billion worth of investments in the Philippines. –Richmond S. Mercurio (The Philippine Star)