Press Release
May 21, 2014


The Philippines, whose 30-percent corporate income tax is the highest among the ASEAN countries, might be left behind in the tight race for job-creating investments if it does not follow the regional trend of reducing tax on business income.

Senator Juan Edgardo "Sonny" Angara pointed this out as the committee he chairs, ways and means, began on Wednesday deliberation on bills, including his, which seek to reduce the country's corporate income tax rate.

Angara said Senate Bill 2163 will help prepare the country to compete and prosper especially when the so-called ASEAN integration, which will create a single market and production base in the region, kicks off in December next year.

The neophyte senator is also the principal author of a bill cutting personal income tax rates.

He noted that after the ASEAN Economic Community or AEC blueprint was signed in 2007, some member-states soon lowered corporate income taxes.

"Thailand gradually reduced its rate from 30 percent in 2011, 23 percent in 2012 to the present 20 percent. Vietnam also lowered its corporate income tax rate from 25 percent to 22 percent this year. It will reduce it further to 20 percent in 2016," he said.

"At present, the region's average rate is about at 23.1 percent, with Singapore as the lowest at 17 percent and the Philippines as the highest at 30 percent," he added.

Angara is proposing to reduce corporate income tax rate in a span of three years... reduction of two percent every year for three years... "to provide room for transition and buffer revenue impact."

If his bill will be enacted into law, projected revenue loss is computed at P7 billion on the first year.

But tracing the 20-year historical record of corporate income tax collections, Angara said collections decrease on the immediate year following the reduction but will eventually rebound back to an increasing trend on the succeeding years.

"It's the classic one-step backward, two-step forward gambit," he stressed. He also emphasized, "The offset will come in the form of making the Philippines an attractive investment haven which in turn would widen the tax base, increase economic activities, and create tax-paying employment."

"Another benefit in having a more competitive corporate tax rate is to cure the country's image as a less attractive investment destination," Angara argued.

Based on the 2013-2014 World Economic Forum Global Competitiveness Report, the country ranked 59th out of 148 economies.

However, compared to neighbors in Southeast Asia, the Philippines placed behind Singapore (2nd), Malaysia (24th), Thailand (37th) and Indonesia (38th).

But if the country does not adjust its high corporate income tax rate, it will be bypassed again and again by the investment train heading towards the region.

He added that "retaining the high corporate tax regime will create practical problems like massive transfer pricing issues that will translate into revenue losses."

Meanwhile, the chair of the powerful ways and means committee also stressed the need to find ways for the government to raise revenues to balance the lowering of taxes.

"That's why we called this hearing because we think measures to raise income are just as important as measures to raise revenue. It should be simultaneous with our moves to make the tax code more progressive, more equitable. As we correct some of the inequities in our highly inequitable society, we must also find a way to balance all these things," he concluded.

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