MANILA, Philippines — The Duterte administration’s planned corporate tax changes will improve the country’s business environment, the International Monetary Fund’s regional director said.
“The second package of tax reform represents a major step forward in modernizing corporate taxes in the Philippines,” IMF Asia and Pacific Department Director Changyong Rhee said in a statement.
“It will help build a more equitable, efficient, and transparent corporate tax system with a lower corporate income tax rate for everyone and a clearer focus on the country’s development priorities,” Rhee added.
House Bill 7458 provides for gradual and conditional cuts in the corporate income tax rate from the current 30 percent to 20 percent, as well as the modernization of investment incentives by ensuring that only qualified industries are given fiscal perks.
Corporate tax reform comprises Package 2 of the Duterte administration’s Comprehensive Tax Reform Program.
BMI research earlier warned that investments could slow over the near-term amid “uncertainties” over the government’s proposed conditional corporate tax reduction and repealing of fiscal incentives, saying such a measure will likely make the Philippines less competitive versus its regional peers.
But for IMF’s Rhee, early approval of the second tax reform package will help the Philippines compete in the global economy.
“It will again show the country’s determination to modernize its institutions; give confidence that the Philippines is committed to keep its public debt manageable, while it scales up spending on infrastructure and social programs; and show to the world that the Philippines will continue to undertake important reforms to support more inclusive growth,” he explained.