Investment Incentives and Effective Tax Rates in the Philippines: A Comparison With Neighboring Countries
IMF Working Papers, September 1, 2008
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Bibliographic details
- Authors: Alexander D Klemm, Dennis P Botman, Reza Baqir
- Published: September 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870657.001
Comparative findings
- The paper compares the general tax provisions and investment incentives in the Philippines to six other east-Asian economies: Malaysia, Indonesia, Lao, Vietnam, Cambodia, and Thailand.
- Calculated effective tax rates show:
- General effective tax rates are relatively high in the Philippines.
- Investment incentives in the Philippines are comparable to those in neighboring countries.
Tax holidays and their effects
- Tax holidays are most attractive for:
- Very profitable firms, creating redundancy.
- Investment in short-lived assets.
Reform scenarios analyzed and quantitative outcomes
- The paper considers recently-proposed tax reforms that would replace tax holidays by:
- A reduced corporate income tax rate, or
- A low tax on gross receipts.
- Results suggest:
- Replacing tax holidays with either a reduced corporate income tax rate or a low tax on gross receipts would result in stronger incentives to invest, while government revenue increases.
- Alternatively, replacing holidays with a general reduction in the corporate tax rate and offering accelerated depreciation will either not provide the same incentives or be very costly.
Subject matter and keywords
- Subject: Corporate income tax, Depreciation, Effective tax rate, Tax holidays, Tax incentives
- Keywords: accelerated depreciation, contract research and development company, depreciation rate, export enterprise, export processing zone company, income tax, indirect tax, personal income, tax year, WP