Philippine Tax System

Running head: TAX SYSTEM IN THE PHILIPPINES 2

Abstract

This paper looks at the current taxation structure in the Philippines. A brief overview of the tax policy reforms in the Philippines is initially outlined. The discussion then focuses on the country’s current structure of the taxation and its primary type: corporate income tax, individual income tax, value added tax, excise tax, and customs duties. The analysis also takes into account other factors such as level of competitiveness, costs of doing business, and availability of infrastructure.

Tax policy is essentially a balancing act between efficiency and equity. It is needed to impose progressive taxes to make society a fairer place to live in. But at the same time, it

The significant increase in share of taxes on income and profits from an average of 25.2% in 1975-1985 to 37.1% in 1996 also showed a positive development from equity point of view. On the other hand, the share of excise taxes and import duties to total tax revenue decreased from an average of 18% in 1975-1985 to 13.2%; and from 25.7% in 1975-1985 to 18.6%, respectively. Diokno (2005) revealed that the overall responsiveness of the tax system to the changes in economic activity has increased from 0.9% during the year 1980 - 1985 to 1.5% in 1986 -

Current Tax Structure of the Philippines

In January 1, 1998, the Tax Reform Act 1997 of the National Internal Revenue code which had gone through significant amendment was executed. The Bureau of Internal Revenue administers taxation. Its function is to assess, collect, process and assist taxpayers. The Commissioner runs the agency. He/she has the sole and initial power to interpret the code provisions and other tax laws.

The Philippine tax system is a global and schedular taxation system where domestic and resident taxpayers are taxed on a worldwide income. They tax non-resident payers on their Philippine-source income. Taxes on corporations are imposed at a flat rate and individuals are taxed at progressive rates.

The local government agencies are authorized to impose local taxes and allow tax exemptions and incentives for business activities within their areas of jurisdiction.

The primary types of taxation are: corporate income tax, individual income tax, value added tax, excise tax, and customs duties.

A. Corporate Income Tax

Domestic