Moody’s hints…
De Guzman noted that President Aquino has largely kept the income tax regime intact since he assumed power in July 2010, mainly by stepping up enforcement and enhancing administrative procedures to boost taxes.
The Bureau of Internal Revenue (BIR), the government’s main tax collection agency, has recorded a marked improvement in performance, with April collections rising 28.2 percent compared with the 12.4 percent increase logged last year.
In contract to a lackluster global economy, De Guzman said the Philippines registered the strongest GDP numbers among all rated countries in the Asia-Pacific region, outpacing larger emerging markets such as China (Aa3 stable), which posted a 7.7 percent growth, and Indonesia (Baa3 stable), which rose by six percent.
Aside from better tax collection, spending restraint ahead of the May national elections also helped the government in attaining a budget surplus.
De Guzman said the government’s spending decisions “are increasingly driven by long-term economic objectives rather than short-term political ones.”
“The fiscal deficit consequently came in at P29.7 billion through the first four months of the year and the government is likely to meet its full-year fiscal deficit target of P238 billion, or two percent of GDP. In contrast, the fiscal deficit for the same period in 2010 – when the Philippines last held elections – came in at P131.6 billion against a full-year target of P293.2 billion, or 3.5 percent of GDP.
The Aquino government intends to maximize the benefits of an investment grade credit rating as it lowers the cost of financing, and widens the state’s fiscal space especially for infrastructure spending.
Moody’s Analytics, a sister company of the credit rating watchdog, earlier said the Philippines was likely to grow between 6.5-7 percent this year, outperforming several rising emerging markets.
De Guzman said that with President Aquino’s party dominating local governments, Congress and the Senate, prospects for more fiscal reforms seem underway.
In particular, bills on the mining sector and the rationalization of fiscal incentives are seen to boost government revenues, De Guzman said.
As seen above, exemption from withholding tax on compensation does not necessarily make the subject compensation exempt from Philippine income tax. In the case of Philippine nationals employed by foreign governments and international organizations based in the Philippines, their compensation income remain subject to Philippine income tax, unless specifically exempt from income tax under the terms and provisions of international agreements or under laws granting privileges to employees of international organizations. However, such Philippine nationals claiming exemption from income tax shall file an application for confirmation of tax exemption with the International Tax Affairs Division (ITAD) of the BIR.
Sheryl Mae T. Amarille-Vegilla is a Manager from the Tax Group of Manabat Sanagustin & Co. ( MS&Co.), the Philippine member Þrm of KPMG International.
This article is for general information purposes only and should not be considered as professional advice to a speciÞc issue or entity.
The view and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or MS&Co. For comments or inquiries, please email manila@kpmg.com or rgmanabat@kpmg.com.