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Investment Incentives and Effective Tax Rates in the Philippines: A Comparison With Neighboring Countries
Author: Mr. Alexander D Klemm, Mr. Dennis P Botman, and Reza Baqir
Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 207
Language:
English
Publication Date:
01 Sep 2008
DOI:
https://doi.org/10.5089/9781451870657.001
ISBN:
9781451870657
ISSN:
1018-5941
Pages:
34
Keywords:
WP; income tax; accelerated depreciation; export enterprise; personal income; contract research and development company; depreciation rate; export processing zone company; indirect tax; tax year
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We compare the general tax provisions and investment incentives in the Philippines to six other east-Asian economies-Malaysia, Indonesia, Lao, Vietnam, Cambodia, and Thailand. We calculate effective tax rates and find that general effective tax rates are relatively high in the Philippines, while investment incentives are comparable to those in neighboring countries. Tax holidays are most attractive for very profitable firms, creating redundancy, and for investment in short-lived assets. We also consider recently-proposed tax reforms that would replace tax holidays by a reduced corporate income tax rate or a low tax on gross receipts. The results suggest that this 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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund