ADB warns gov’t against move to hike VAT to 15%
By Ronnel Domingo
Philippine Daily Inquirer
MANILA, Philippines—The government should not raise the value-added tax to 15 percent as this, along with the corporate income tax being lowered further, would make the Philippine tax system more regressive, according to the Asian Development Bank.
In a policy note on the Philippines, the multilateral lender said the Philippines should rather raise excise taxes on tobacco, alcohol and gasoline to improve its tax effort or collections expressed as a percentage of total output (gross domestic product).
The ADB noted a standing proposal for another increase in the VAT from the current 12 percent and a further lowering of the corporate income tax to 25 percent from 30 percent would not improve the tax effort, which was pegged at 12.8 percent in 2009.
“The overall impact [of this scenario] on the tax effort is neutral,” the ADB said. “But if the [corporate income tax] is cut further to 20 percent, the tax effort decreases by -0.6 percentage point.”