There is a theory, usually expounded by free marketeers, that governments, and societies at large, benefit from tax cuts because: taxpayers are less inclined to find ways to avoid tax and therefore the government collects more revenue; more revenue for the government means more can be spent on public services; and a lower tax burden means people have more disposable income to spend, and businesses have more money to invest. In other words, everyone’s a winner!
But has the theory been tested in the real world? I suppose you could say that it holds true to some extent. Look at the countries that enjoyed stellar rates of economic growth prior to the last financial crisis. They tended to be low-tax economies like Singapore, the United Arab Emirates, and Ireland. Many high-tax economies, particularly in Europe, barely registered a blip on the … Read More »
Many a government has promised to simplify and reform their country’s nightmarish tax code, only to fail to deliver before its time is up. But regardless of that fact, when a government fails to deliver, it deserves to be called out. And this week’s villain of the piece is the Philippines, where businesses have once again been imploring the Government to reform the nation’s dysfunctional tax system.
For its part the Government has frequently assured taxpayers that it is committed to tax reform. But commitment and action are not the same thing, and the lack of action is now showing. The Philippines ranked 126th out of 180 countries in PwC’s Paying Taxes Index 2016. This index tells us that companies have to make 36 separate tax payments, a process taking an average of 193 hours per year. What’s more, the Philippines’ … Read More »
A re-run of the classic tax western is taking place in the Philippines, in which the bad guys want to raise taxes in all directions while the good guy (Ronald Reagan?) believes that reducing tax rates will result in more tax being paid. The part of the Gipper is being played by Juan Edgardo “Sonny” Angara, who wants to cut the country’s 30 percent corporate tax rate (the highest in South-East Asia), while tax professionals gasp with horror, needless to say. Well, how’s about some facts? In April, the Philippines Department of Finance disclosed a 26 percent rise in collections of import duties, taxes and fees in the first quarter of the year. In money terms that’s equivalent to USD500m (USD2bn annualized), while our hero predicts a loss of just USD160m in corporate tax receipts in the first year of … Read More »