Taxing Problem

PHILIPPINES - Report 05 Oct 2015 by Romeo Bernardo and Christine Tang

This time last year, we called attention to the higher likelihood of congress’s passing revenue-eroding tax measures as election season approached.[1] And indeed a few months later, President Aquino signed a law increasing the tax-exempt threshold for employee bonuses, adjusting for inflation the cap of P30,000 set 20 years ago, raising this to P82,000. The adjustment hardly caused a stir, probably because only a small group of taxpayers benefited, and the estimated revenue losses, which varied widely from a low of P2 billion to as much as 30 billion (0.2% of GDP), were likely viewed as modest, especially after considering some offsets from consumption taxes. Shortfalls in government spending that led to below-target budget deficits in 2013-14 and a 2% of GDP primary surplus last year may also have contributed to a more relaxed attitude over the revenue losses.

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