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Investment Incentives and Effective Tax Rates in the Philippines; A Comparison With Neighboring Countries

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  • Alexander D Klemm
  • Dennis P Botman
  • Reza Baqir

Abstract

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.

Suggested Citation

  • Alexander D Klemm & Dennis P Botman & Reza Baqir, 2008. "Investment Incentives and Effective Tax Rates in the Philippines; A Comparison With Neighboring Countries," IMF Working Papers 08/207, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/207
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. David Nguyen-Thanh & Christoph Strupat, 2012. "Is the Burden Too Small? – Effective Tax Rates in Ghana," Ruhr Economic Papers 0389, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. repec:zbw:rwirep:0389 is not listed on IDEAS
    3. Somaya Ahmed Aly Abdel-Mowla, 2012. "The Egyptian tax system reforms, investment and tax evasion (2004-2008)," Journal of Economic and Administrative Sciences, Emerald Group Publishing, vol. 28(1), pages 53-78, January.
    4. Parel, Danileen Kristel C., 2017. "Evaluation of Fiscal Incentives in the Philippines," Discussion Papers DP 2017-26, Philippine Institute for Development Studies.
    5. Nguyen-Thanh, David & Strupat, Christoph, 2012. "Is the Burden Too Small? – Effective Tax Rates in Ghana," Ruhr Economic Papers 389, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Briones, Roehlano M., 2016. "Growing Inclusive Businesses in the Philippines: The Role of Government Policies and Programs," Discussion Papers DP 2016-06, Philippine Institute for Development Studies.
    7. Alexander Klemm, 2010. "Causes, benefits, and risks of business tax incentives," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(3), pages 315-336, June.
    8. Briones, Roehlano M., 2016. "Growing Inclusive Businesses in the Philippines: The Role of Government Policies and Programs," Research Paper Series DP 2016-06, Philippine Institute for Development Studies.
    9. Danileen Kristel C Parel, 2017. "Evaluation of Fiscal Incentives in the Philippines," Working Papers id:12068, eSocialSciences.
    10. Masaaki Suzuki, 2013. "Corporate Effective Tax Rates in Asian Countries," KIER Working Papers 875, Kyoto University, Institute of Economic Research.
    11. repec:spr:eurase:v:7:y:2017:i:2:d:10.1007_s40822-017-0066-0 is not listed on IDEAS

    More about this item

    Keywords

    Corporate taxes; Investment incentives; Southeast Asia; Revenue sources; Philippines; Tax reforms; Effective tax rates; South-East Asia; Tax holidays; tax rates; tax incentives; tax rate; taxation;

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