I got this photo from Mon Abrea, a famous tax consultant and tax simplification advocate. This is after the event.
Our tax system is among the highest, most envy-inspired in Asia. Data from WB-PWC's Paying Taxes 2016 Report.
These + other tables mean…
Tax wise, PH is NOT an attractive place to do business in the ASEAN. Highest total tax rate (TTR) in the region plus complicated and bureaucratic procedures. Only developed welfare countries Australia and Japan, and socialist China have higher TTR than PH.
Although in number of hours, VN proves it is indeed a socialist and bureaucratic state; in number of payments, ID’s bureaucracies are most notable.
Tax competition among ASEAN countries is happening. BR, SG and CM keeping their low TTR, MM significantly cut its TTR last year. Only MY is dueling with PH in high TTR.
The time to cut the PH’s (a) number of taxes and forced contributions, and (b) income tax rates, was yesterday. So we need to move fast today and tomorrow.
So if we can not significantly cut income taxes, one alternative is...
Proposal 3: National income tax is zero, allow provinces to impose income tax.
“No tax on work.” Survival and prosperity of societies are based on work of people. Work should not be penalized and discouraged with taxes, the way governments discourage smoking and drinking with more taxes.
National income tax is zero, or 5% max. National government to keep collecting consumption-based taxes (VAT, excise, franchise, vehicle registration, other taxes) and regulatory fees, while devolving more functions to provincial governments.
Provinces can impose income tax. Let there be tax competition, governance competition among them.
Tax and governance competition, infrastructure and security competition among provinces will empower the people and companies to vote with their feet.
Of 3 proposals, most feasible is #1, cut income tax rates to 20% or lower. Higher Q, wider tax base, will compensate for the reduction and propel higher TR.
Proposal #3 will attract the advocates of federalism and more decentralization and denationalization.
Proposal #2 will attract the more daring politicians, business and civil society leaders. Long-term view.
All 3 proposals can lead to more individual freedom, freer markets and limited government.
Tax Cut 22: ASEAN Taxation and Philippine Fiscal Incentives, March 25, 2015
Tax Cut 23: Tax Competition in Asia, Hikes in Europe, May 10, 2015
Tax Cut 24, Tax reform forum in Ateneo, March 26, 2016
BWorld 33, Computing rise in tax revenues if rates are cut, December 17, 2015