Press Release
September 14, 2007

"Rationalize fiscal incentives, maximize tax collection to at least regional average" - Angara

Senator Edgardo Angara wants tax collection of government to meet the regional average at the minimum, pointing out the need to rationalize the country's fiscal incentives and curb tax evasion.

In a budget hearing, Senator Angara pointed out that the Philippines 's percentage of tax in Gross Domestic Product is very low compared to the levels in Southeast Asia . The country's share of tax to GDP is 14.3%, while the Southeast Asian average is at 16.2%. Neighboring countries such as Malaysia have 18 % of tax share in its GDP.

"We should set our targets higher than our historic high of 17% of GDP tax collection in the 1990s," said Senator Angara.

According to Senator Angara, "We need a forward planning to help us explain to the public why it's necessary to raise more tax money. We have to set goals posts - minimum, median and maximum tax efforts. We could use the status quo, the 14.3 percent to GDP as the minimum, and the 16.2 percent as our median. But definitely we've got to set standards higher than our internal record."

"The record high of 17% in 1996, that's the time when we introduced the VAT (Value Added Tax), and we cannot always rely on new taxes to increase collection," said the senator.

Instead, Senator Angara suggests rationalizing fiscal incentives granted to corporations, as well as reducing smuggling and tax evasion to increase the tax collection in the Philippines .

"If you improve tax administration coupled with the improvement of the financial system, I think your tax base would become broader and your tax effort will be on autopilot. You won't need to exhort everyone to think of ways in raising new taxes," Senator Angara pointed out.

"Don't get me wrong. I am in favor of granting fiscal incentives to encourage direct investments in the country, especially if it will develop the country's economy. Pero minsan inaabuso na tayo. That's why we've got to set the parameters of fiscal incentives in the country," said Senator Angara.

The senator also urged the crackdown on smuggling, which takes tax revenue away from the government.

According to Department of Finance Secretary Margarito Teves, the government loses Php60 to 65 billion a year in technical smuggling alone. Another estimated Php60 to 65 billion is lost to the inefficiency of VAT collections.

Secretary Teves also estimates the fiscal incentives to amount to Php280 billion a year.

"We should consolidate the country's fiscal program by means of improved tax administration efforts." Senator Angara, who is also the Chair of the Senate Committee on Banks, Financial Institutions and Currencies, said.

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