Purisima Looks To Broaden Philippines Tax Base
24 June 2013
Posted by: Author: Mary Swire
Author: Mary Swire
Speaking at the recent General Membership Meeting of the Federation of Philippine Industries, Finance Secretary Cesar Purisima said that, while the Philippines fiscal position has improved markedly, there is still much work to be done in improving tax revenue collections.
He identified a need for the country's tax base to be broadened for the Bureau of Internal Revenue (BIR) and, in particular, for collections to be increased from self-employed, small business owners and professionals (SEPs).
The top 2,000 large taxpayers in the Philippines pay 61 percent of the BIR's total revenue of just over PHP1 trillion (USD22.8bn), and taxpayers being paid a wage or salary from which tax is automatically are providing 81.5 percent of individual income taxes. On the other hand, of the more than 1.8m registered SEPs, only 403,000 are paying taxes, with an average assessment of PHP33,440 and an implied monthly income of only PHP23,650.
According to BIR data, even with a PHP1bn increase in tax payments from SEPs from 2010 to 2012, SEPS, at present, constitute only 6.8% of total individual income taxes. The BIR aims to improve their average tax payment to PHP200,000, which would result in a 2% increase in the country's ratio of tax to gross domestic product by 2016.
Purisima also attacked the low level of duties and other taxes being obtained by the Bureau of Customs (BOC) due to the prevalence of smuggling. For example, the BOC collected only PHP88,700 in duties and taxes per inbound container in 2012, which, he said, should be increased to PHP200,000 per container, while net imports of iron and steel have remained largely unchanged, despite the recent increase in domestic construction activity.
He indicated that oil smuggling results in lost revenue of over PHP20bn each year. According to the data from the Department of Energy, Philippines oil demand amounted to 106.9m barrels in 2011. However, current BOC data only records 67.6m barrels of oil imported in the same year, signifying a discrepancy of 39.3m barrels that is considered likely to be made up through smuggling.
However, the BOC is now being able to enforce the regulation issued last year that changes the tax administration on petroleum products to require the upfront payment of value added tax (VAT) and excise duty on imported oil. Even if the oil is to be used within special economic zones and qualify for tax exemptions, tax-exempt parties will have to pay the taxes and the file for refunds.
In addition, a system of port accreditation will be implemented for commodities at high risk of smuggling. Only particular ports will be accredited for importation of sensitive commodities, such as oil and steel, subject to standards and technical requirements.
Purisima also warned that the Government could close some ports for imports, to improve BOC efficiency. It is believed that, with so many ports, some of which deal with few imported goods, a rationalization could also be beneficial for businesses..