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By Chino S. Leyco, Reporter
TO compensate with the government losses from
withholding tax exemption and reduction of corporate income tax next
year, the International Monetary Fund (IMF) is urging the Arroyo
administration to prioritize legislative measures that concern
fiscal policies.
Reza Baqir, IMF resident representative said the
government should fast track the rationalization of fiscal
incentives and reform excises that are pending in Congress.
Likewise, accelerate administrative reform measures in two main tax
agencies—Bureaus of Internal Revenue and of Customs.
“Recent income tax relief bill and planned to
cut in corporate income tax could pull down tax effort in the range
of one-half percent of [gross domestic product on a full year
basis],” Baqir said.
He added a significant drop in the tax effort
could reignite concern in financial market.
The IMF has been wanting the Philippines to
streamline the country’s fiscal incentives for investors and cut
the corporate tax rate, citing the country has one of the highest
corporate income tax rates in Asia.
IMF said the government should look at lowering
it to 25 percent from the present 35 percent, and to compensate the
expected losses, the government should cancel fiscal perks offered
to investors.
Baqir said as the government cut tax incentives,
it could raise as well excise tax by indexing it to inflation, which
in turn will partly recoup revenue lost.
For the BIR and Customs, Baqir said Finance
department should focus on improving their tax- collection
efficiencies that will soon produce sustainable gain in years to
come.
The IMF official earlier sad state-owned asset
privatizations still good sources of revenue.
“Another way to protect the poor is to
increase the tax collections efficiency. This would increase the
resource envelope available for social spending,” he said.
Baqir, likewise said that lifting the 12-percent
value- added tax on oil products will give a negative impression to
investors in the Philippines, adding that the VAT gives additional
resources for pro-poor spending.
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