World Bank to PH: Improve tax collection

Cherrie Regalado

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World Bank says improving tax administration, simplifying taxation process and reviewing incentives will help the government achieve inclusive growth

COLLECT TAXES. World Bank economist Rogier van den Brink urges Philippine officials improve tax collections to help achieve inclusive growth. Photo by Cherrie Regalado/Rappler

MANILA, Philippines-  The current administration will need to increase its revenues in the mid-term to finance social and infrastructure projects meant to reduce poverty and promote inclusive growth, according to a senior World Bank economist.

World Bank’s regional chief economist Bert Hofman at the release of the East Asia Pacific Economic Update  report on October 7 said the government should work harder in funding projects — especially infrastructure projects — to eradicate poverty.

READ: World Bank: PH to grow 7% in 2013

“What we have analyzed is, if all plans of governmentt will be implemented for more inclusive growth, (including ) infrastructure development, then they will need to be financed by budget resources. The Philippines needs more resources, more revenues,” Hofman said.

READ: Jobless growth? It will take time, NEDA says

He stressed that while the current administration has implemented measures to increase revenues, such as  the implementation of the sin tax law, more needs to be done.

“The sin tax has helped, but more is needed in the midterm. Overall, more revenues are needed to sustain infrastructure development,” Hofman added.

Simplify taxation process

Rogier van den Brink, World Bank’s lead economist poverty reduction and economic management, said  a simplification of tax collection will increase revenue collection.

“There’s a lot of rules in taxation which are contradictory, which makes it difficult to pay their taxes, and alot can be done there,” van den Brink noted.

He said that government should review its current taxation processes, and reform as necessary to increase tax collection.

“We are not singling out a particular tax policy but the first step is to make the tax system simpler,” Van den Brink said.

Review tax incentives

The tax breaks given to various industries should be one of the  tax measures government must review, van den Brink stressed.

Tax breaks are granted to various industries to help them flourish while they are in early stages.

“Take a hard look at the tax break given to various businesses and sectors,” he noted.

Van den Beer explained that not all industries and sectors should enjoy tax breaks as these businesses already are successfully earning profits.

“What we are seeing in the Philippines [is that] a lot of sectors were given tax breaks and now they are growing very fast,” he added.

Van de Beer said the passage of the proposed Fiscal Incentives Bill, a bill that would rationalize the way incentives are granted to various industries, will be very useful in reviewing which industries still should continue to receive tax breaks.

“The fiscal incentives bill will provide transparency on which industries get tax incentives,” he added.

It will be a tedious process, Van de Beer warned. “That’ a diifuclt issue because industry wide, they will want to defend it,” he shared. – Rappler.com

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