PH medium firms said to struggle with high tax rates

The rate of taxes slapped on medium-sized businesses operating in the Philippines remained one of the highest in the Asia Pacific, exceeding both the regional and global averages, according to a joint report of World Bank and global professional services network and auditor PricewaterhouseCoopers (PwC).

Of the 189 countries covered by the “Paying Taxes 2015” report released on Nov. 20, the Philippines also did poorly in the ease of paying corporate taxes category, ranking 127th.

In terms of total tax rate, which is defined by the report as the ratio of “total taxes borne (or actual tax payable) to commercial profit,” the Philippines posted 42.5 percent, the 10th highest in the Asia Pacific, based on Paying Taxes 2015.

Of the Philippines’ total tax rate, 20.5 percent are profit taxes, 8 percent are labor taxes, while other taxes constitute the remaining 14 percent.

In the previous report, the total tax rate of the Philippines stood at a higher 44.5 percent–19.6 percent are profit tax, 10.8 percent are labor tax, and 14.1 percent are other taxes.

The nine other countries in the Asia Pacific with total tax rates higher than the Philippines were Palau (75.4 percent), Marshall Islands (64.8 percent), China (64.6 percent), India (61.7 percent), Micronesia (60.5 percent), Sri Lanka (56.6 percent), Japan (51.3 percent), Myanmar (47.7 percent) and Australia (47.3 percent), the latest report showed.

The Asia-Pacific average stood at only 36.3 percent. Globally, a standard company may have a total tax rate of 40.9 percent of profits, the report showed.

In the Philippines, it takes businesses 193 hours to comply with tax requirements, faster than the global average of 264 hours, as well as the Asia-Pacific average of 229 hours.

It takes 42 hours to comply with corporate income tax, 38 hours for payment of labor taxes, and 113–the most number of hours–to pay consumption taxes in the Philippines.

In terms of the number of tax payments, medium-sized companies in the Philippines need to shell out 36 times a year, a frequency higher than the average of 25.9 tax payments a year globally, and 25.4 in the Asia Pacific.

While Philippine companies pay their profit taxes only once a year, payments of labor taxes happen 25 times a year, while other taxes are paid 10 times within the year.

In the overall ease of paying taxes, the Philippines ranked 127th, a position just below Singapore (5th overall), Brunei Darussalam (30th), Malaysia (32nd), Timor-Leste (55th), Thailand (62nd) Cambodia (90th) and Myanmar (116th).

Only Laos, Indonesia and Vietnam fared worse than the Philippines in Southeast Asia.