THE PHILIPPINE government can generate more tax revenues by broadening its tax base, the World Bank said, as the government pushes to expand excise tax coverage.
“What you’d want to see is government reform to broaden the tax base. And we are seeing that in some of the proposals being discussed to broaden excise (taxes), for example. These are all measures that would allow you to collect more without burdening low-middle income people,” World Bank Senior Country Economist Jaffar Al-Rikabi said at a media briefing on Monday.
The Department of Finance (DoF) on Monday announced they are proposing new and higher taxes on sweetened beverages, e-cigarettes, flexible plastic products, luxury vehicles and private aircraft under the Promoting Growth, Revenue, and Equity towards Socio-economic Sustainability bill. The tax hikes are meant to offset revenue losses from the proposed personal income tax relief measures.
World Bank Division Director for the Philippines, Malaysia and Brunei Zafer Mustafaoğlu said that the government will need to ensure the tax collection process is growth-based, fair and non-disruptive, non-regressive, non-distortionary, and not environmentally harmful as tax revenues will help the country advance from the upper-middle income bracket.
“We will see how the tax discussions will evolve in the Congress, but I would certainly think that what is important… is the country needs to increase its revenue basis to support more development and invest in infrastructure, education, or health,” he said, referring to the DoF’s proposed package of new and higher taxes.
“But as you increase the revenue basis, the country will need to look at it from all these dimensions.”
Mr. Al-Rikabi said the Philippines could improve the efficiency of its tax collection system, noting that Thailand generates a similar level of tax revenue despite having a lower value-added tax (VAT) rate.
“It tells you that there’s a lot of room to improve the efficiency of the VAT without increasing rates,” he said, noting that the ease of paying taxes for businesses and individuals could be improved.
He said that studies globally have shown easing tax payment processes results in voluntary compliance. “It’s easier to pay, so people don’t put it off.”
Mr. Al-Rikabi said the country’s tax base can also be broadened by removing ineffective exemptions and using the new revenue for financing social protection programs.
“Another example of broadening the base is looking at which exemptions are not effective… If it’s very ineffective, it’s better to collect that revenue and use it, for example, for social protection through the 4Ps program (Pantawid Pamilyang Pilipino Program).”
Department of Economy, Planning, and Development Undersecretary Rosemarie G. Edillon said on Monday the proposed tax relief measures should be accompanied by initiatives to boost productivity and support small businesses.
Ms. Edillon said the resulting increase in disposable income for some Filipinos could ease pressure for wage increases but warned that the measures could become inflationary unless accompanied by higher productivity. — A.M.C.Sy
