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MANILA – The Philippines ranked a poor 127th among 189 economies reviewed by international audit firm PricewaterhouseCoopers (PwC) in terms of ease of paying taxes for business, while its neighbors, Thailand and Malaysia landed on 62nd and 32nd respectively, Senator Francis “Chiz” Escudero said on Sunday.
This means Escudero said, the Philippines does not only impose one of the highest income tax rates in Asia, it also has one of the most tedious processes for paying taxes in the world.
“The Philippines is just three notches above Sierra Leone and 12 notches above Sudan in the rankings. In fact, it’s even easier to pay taxes in Iraq, Iran and Afghanistan. What does that say about us?” Escudero asked.
“Where else will you find a country that taxes its people severely and then makes it hard for them to pay?” he said.
The study, called “Paying Taxes 2015,” is an annual research done by PwC and is included in the “Doing Business” project by the World Bank Group. It measures the ease of paying taxes across economies by assessing the time it takes for a medium-size company to prepare, file and pay its taxes; the number of taxes that a company has to pay; the method of payment; and the total tax liability as a percentage of its commercial profits.
In the Philippines, according to PwC, it takes 193 hours for a business to comply with 36 required payments. It put the average taxes and contributions paid by a Philippine employer at 42.5 percent, or 6 percent higher than the average tax rate in the Asia Pacific.
Steve Forbes, chair and editor-in-chief of Forbes Media, said the Philippines needed tax reforms and improved infrastructure if it were to sustain the stability and growth it has achieved in the last five years.
Forbes, who spoke on the sidelines of the Forbes Global CEO Conference in Manila, said the key was to simplify, not raise, taxes to “encourage more entrepreneurs to do business.” He said the Philippines can study and imitate the tax system of Hong Kong.
Hong Kong ranked fourth in the PwC study, with only three tax payments, while Singapore ranked fifth, with five tax payments.
“How can we encourage investors to come and put their money here when a third of that will go to taxes that will be difficult to pay?” Escudero said.
The senator reiterated the need to legislate tax reforms not only to lower the income taxes paid by individuals and businesses but also to streamline the process of payment to encourage non-salaried workers and micro-, small and medium enterprises (MSMEs) to pay due taxes.
Escudero urged Filipinos to make tax reforms an election issue so that more leaders would throw their support behind legislative efforts to amend the Tax Reform Act of 1997.
Make tax reform an election issue
“Everyone is now singing the same tune, even those who were hesitant to support us in the past. And that’s fine. The important thing is to let this campaign for tax reforms gather steam because it is a legitimate issue that begs to be addressed if we want to sustain economic growth,” he said.
The PwC study measured 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 employers.
According to PwC, the results of “Paying Taxes 2015” “illustrate both successful tax reforms and reform challenges” and provide a platform for government and business “to engage in constructive discussion around tax reform across a broader range of issues.”
The United Arab Emirates and Qatar shared the top spot for ease of payments, requiring only four payments that can be done in 12 hours in the UAE and 41 hours in Qatar. Saudi Arabia ranked third with three payments that can be accomplished in 64 hours.
Bolivia had the worst tax payment procedure with 42 tax payments requiring 1,025 hours.
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