PICPA prexy: BIR needs to ease Philippines tax system

CEBU, Philippines – The government is urged to make the tax system more simpler and efficient to raise the Philippines' competitiveness.

Dr. Edgar Detoya, the incoming president of the Philippine Institute of Certified Public Accountants (PICPA) Cebu Chapter, said that processes at the Bureau of Internal Revenue can further be streamlined to make paying taxes simpler.

Detoya was sought for reaction on the study of international audit firm PricewaterhouseCoopers (PwC) which ranked the Philippines 127th among 189 economies reviewed in terms of ease of paying taxes for businesses. The Philippines is behind its neighbors Thailand and Malaysia which were ranked on 62nd and 32nd, respectively. While Hong Kong ranked fourth in the study.

The study entitled "Paying Taxes 2015" is an annual research done by PwC and is included in the "Doing Business" project of the World Bank Group.

The PwC study measures the ease of paying taxes across economies by assessing the time it takes for a company to prepare, file and pay its taxes; the number of taxes it has to pay; the method of payment; and the total tax liability as a percentage of its commercial profits.

The study found out that in the Philippines, it takes 193 hours for a business to comply with 36 required payments. The average taxes and contributions paid by a Filipino employer stood at 42.5%, 6% higher than the average tax rate in the Asia Pacific.

Senator Francis Escudero earlier said the Philippines does not only have one of the highest income tax rates in Asia, it also has one of the tedious processes for paying taxes in the world.

Detoya said the tedious system affects the country's competitiveness as an economy because it makes it less efficient.

"For you to attract foreign investors, you need to make transactions efficient. Inefficiency in transactions adds to the cost of doing business. Foreign investors are very keen on the cost of doing business. Corruption also adds to the cost," Detoya told The FREEMAN in an interview. Detoya is also dean of the College of Commerce at the University of San Jose-Recoletos.

Detoya pointed out more reforms can still be done to improve the tax system.

He cited priorities the government should look into such as lowering the tax rates; rationalizing the tax incentives for businesses; investing more in IT infrastructure to support the computerization of BIR processes; and further educating the public on tax matters.

"There are things still we can do to make the [tax paying] process more efficient. Even the online system needs improvement," he added.

Detoya also believes that lowering the tax rates would increase the level of compliance among individuals and businesses.

If tax rates are reduced, Detoya said more micro, small and medium enterprises and non-salaried workers will come out of the underground economy and pay their tax obligations.

"It will also invite more investors because as an investor, I would want to invest my money in a country that imposes lower tax," he added.

Meanwhile, the PwC study measures corporate income and other profit taxes, labor taxes, property taxes, dividend taxes, capital gains taxes, road and vehicle taxes, waste collection taxes, and other fees and social contributions required from taxpayers.

PwC said the results of the study "illustrate both successful tax reforms and reform challenges as well as providing a platform for government and business to engage in constructive discussion around tax reform across a broader range of issues." (FREEMAN)