The Philippine government has the potential to generate more tax revenues by broadening its tax base, according to the World Bank. This comes as the government pushes to expand excise tax coverage.
World Bank Senior Country Economist Jaffar Al-Rikabi emphasized the importance of government reform to broaden the tax base. He noted that this can be achieved through measures such as broadening excise taxes, which would allow for more revenue collection without burdening low-middle income people.
The Department of Finance is 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. These tax hikes are intended to offset revenue losses from proposed personal income tax relief measures.
World Bank Division Director for the Philippines, Malaysia, and Brunei Zafer Mustafaoğlu highlighted the need for the tax collection process to be growth-based, fair, and non-disruptive. He emphasized that tax revenues will help the country advance from the upper-middle income bracket.
Mr. Al-Rikabi suggested that 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. He also emphasized the importance of easing tax payment processes, as this can lead to voluntary compliance.
Mr. Al-Rikabi also proposed broadening the tax base by removing ineffective exemptions and using the new revenue for financing social protection programs. He cited the example of the Pantawid Pamilyang Pilipino Program as a potential recipient of these funds.
Department of Economy, Planning, and Development Undersecretary Rosemarie G. Edillon emphasized the need for the proposed tax relief measures to be accompanied by initiatives to boost productivity and support small businesses. She warned that the measures could become inflationary unless accompanied by higher productivity.
