MANILA: The International Monetary Fund (IMF) has expressed support for a major overhaul of the Philippine tax system, including the comprehensive tax reform plan of the Department of Finance (DOF) and the proposed relaxation of the country’s bank secrecy law.
In a country assessment report prepared by the IMF Executive Board’s staff team, the multilateral financial institution gave its nod to the DOF’s tax policy reform for being “net revenue positive with due attention paid to equity.”
It also backed the DOF’s efforts to amend the bank secrecy law after consultations with Philippine authorities on economic policies and developments under the new government. This would allow tax authorities “access to individual bank account information and make tax evasion a predicate crime for money laundering in order to improve the efficiency and equity of revenue collection.”
The IMF report said the DOF has come up with “a package of reform measures that includes lowering personal and corporate income taxes and simplifying tax processes. The revenue erosion from the lowering of income tax rates would be offset by reform initiatives.”
With these measures, the staff team said the government aimed to increase total revenue effort to about 18 percent of gross domestic product (GDP) by 2022. It supports the government’s target to “increase public infrastructure spending to at least 5 percent of GDP over the medium term.”
Noting that income inequality and unemployment persisted in recent years despite the country’s favorable macroeconomic performance, the report also cited the government’s objective of rapidly reducing poverty under its 10-point socioeconomic agenda.
