The European Chamber of Commerce of the Philippines (ECCP) said the Philippines has to adjust its taxation system or it will be at the losing end when the Association of Southeast Asian Nation (Asean) integrates.
The body said investors in the country would start packing up for Vietnam or Indonesia if the government doesn’t make the said changes.
ECCP president Michael Raeuber said the Philippine government needs to adjust tax imposed on individuals and companies to ensure the country’s competitiveness.
“We have to bring the Philippines forward. The government now has limited time to approve economic legislation and institute reforms. If we do not address the issue now, companies will be going to Vietnam and not here,” Raeuber said.
He said ECCP has been encouraging European businesses to invest in the Philippines. “We are also working closely with Philippine exporters not just to Europe but to other countries. There is a need to see some action,” the official added.
Raeuber said there are now companies that want to leave China and are now eyeing Vietnam instead of the Philippines as their preferred destination.
Such was blamed to bad airports, low connectivity, corrupt local government units and so many documents needed before allowing to start business operations in the country.
Raeuber said the country must be competitive enough by offering the right set of incentives and tax system.
The ECCP seemed to have found an ally in Rep. Romero Quimbo who said the Philippines is a much costlier place for investments as compared to its neighbors in the region.
“The cost of doing business in the Philippines is higher than in competing countries in the region.
With Asean integration starting soon, it makes good economic sense to completely overhaul our corporate and individual income taxes in order to be competitive,” Quimbo, chairman of the House committee on ways and means, said.
The lawmaker said the government has less than four months in the legislative calendar to correct the issue. He said it has always been a tug-of-war with the Department of Finance.
Quimbo said tax bracket rates have not been adjusted since 1997 with 86 percent of income taxes being shouldered by only 16 percent of the population.
“We will be losing out to Thailand, Vietnam, and Cambodia,” Quimbo said.
He said the country has to grow economically by at least 6.40 percent annually to slow down poverty.
Quimbo said the country’s poverty incidence is at 23 percent as compared to the region which is only at four percent.
He said there is a need to attract more foreign investments especially in agriculture and manufacturing sectors to achieve inclusive growth.
Individual taxes imposed across the Asean ranges from zero percent to a high of 15 percent as compared to the Philippines which is at 25 percent.
Last year, foreign direct investments in the country reached $6.20 billion representing a 65.90 percent increase from 2013.

Source: The Daily Tribune