Binay says PH tax system repels investors
THE Philippines lags behind the Association of Southeast Asian Nations in attracting foreign direct investment because investors find its tax system unattractive, Vice President Jejomar Binay said Wednesday.
“The Philippines currently has the second highest personal income tax rate [32 percent] and the highest corporate income tax rate [30 percent] among its Asean-6 peers,” Binay said during an open forum at the 4th Deutsche Bank Access Philippines Conference in Makati.
“This makes the country’s tax system uninviting as the region moves toward economic integration,” he said.
Binay made the statement even as his spokesman criticized the Health department for neglecting the interest of millions of poor families in eight regions in Mindanao and the Visayas who, he said, were deprived of better health care because of unfinished projects worth P909 million.
Citing a report from the Commission on Audit, Joey Salgado said the Health department was unable to begin or finish the construction of health facilities in the Cordillera Administrative Region, Western Visayas, the Zamboanga Peninsula, Northern Mindanao, SOCCSKSARGEN and CARAGA.
“The [department] should have done something about this,” Salgado said.
“They should have monitored the projects and ensured the completion of these projects considering that government funds are involved.”
Binay said the Philippines has the highest total tax rate as a percent of commercial profits: 44.5 percent as opposed to Singapore’s 27.1 percent, Thailand’s 29.8 percent, Indonesia’s 32.2 percent, and Malaysia’s 36.3 percent.
Yet the Philippines has one of the lowest tax-to-GDP ratios: 12.8 percent as opposed to Thailand’s 17.6 percent, Malaysia’s 16.1 percent, Singapore’s 13.8 percent and Indonesia’s 11.8 percent.
Binay said reducing the corporate income tax rates will entice foreign investors to do business in the Philippines.
“We should gradually, within five years, reduce the current corporate income tax rate from 30 percent to a more realistic and reasonable rate that is consistent with our Asean peers,” Binay said.
He said that in the long term, lower income tax rates will draw more foreign investments, resulting in more jobs for the people and more revenues for the government.
He said that while the overhaul of the income tax system is estimated to cost the government P30 billion a year, the amount is just a little less than 1 percent of the P3-trillion proposed budget for 2016 and about 0.23 percent of the gross domestic product.
“The amount is also less compared to the government’s estimated underspending of P500 billion in 2015,” Binay said.