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Philippines Looking To Catch Up On Tax Efficiency

The Philippines intends to address its low tax-efficiency rate, which continues to lag behind its peers, Finance Department spokesperson Paola Alvarez said.

Following on from an announcement that the Philippines will rein in tax breaks to expand the list of goods and services subject to the headline VAT rate, Alvarez pointed out that both Philippines and Thailand collect the same amount of value-added tax (VAT) revenues, even though the VAT rate in Philippines is 12 percent and Thailand’s is seven percent.

“This example demonstrates the gross inefficiency of our system which we need to correct through tax reforms designed to broaden the tax base and collect more revenues,” Alvarez said.

At the end of August, the Philippines announced plans to remove various VAT breaks and leave only those considered essential.

Alvarez highlighted that the Filipino VAT regime is far less efficient than other countries in the region due to the existence of about 30 exemptions for different goods and services. The only tax breaks to be maintained are certain concessions for the elderly and for food in its raw form, medicine, and education.

The nation’s corporate tax efficiency is poor too; corporate tax revenues equal just 3.5 percent of gross domestic product, way below Malaysia and Singapore, at 34 percent and 24.1 percent, respectively.

December 30, 2019 / No Comments /  
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USTR Criticized For Exclusions After GSP Review

“Deep disappointment” has been expressed over the exclusion of travel goods produced in the Philippines, Thailand, Pakistan, Indonesia, and Sri Lanka from duty-free status under the US Generalized System of Preferences (GSP) program, following the US Administration’s recent annual review.

Under the GSP program, approximately 5,000 products from 122 beneficiary developing countries and territories, including 43 least developed countries, are eligible for duty-free treatment when exported to the United States.

Based on the review, which considered various issues and petitions related to the eligibility of products under the GSP program, new duty-free status has been added for 28 travel goods (including luggage, backpacks, handbags, and wallets).

However, a July 5 letter to the United States Trade Representative (USTR) from the American Apparel & Footwear Association, the Outdoor Industry Association, the Sports & Fitness Industry Association, and the Travel Goods Association noted that duty-free status for the travel goods has been limited to African Growth and Opportunity Act (AGOA) states and Least Developed Beneficiary Developing Countries (LDBDC).

“Deferring the decision for other GSP-eligible countries, which is not a decision, without any indication of the timeline for a final decision, further harms US businesses and the development of other GSP beneficiary countries by creating confusion and uncertainty,” the letter said.

It added that the “complex” backpacks and sports bags currently being made for US businesses “will not be made in AGOA or LDBDC countries in the near future as they continue to develop production, capabilities, and capacity. … More importantly, refusal to decide on the eligibility for other GSP beneficiary countries will negate any significant development gains that could have been achieved through the expansion of GSP eligibility to a new set of products.”

The associations pointed out that, “in 2015, the US imported 2.1bn [travel goods] items; of that amount 85 percent were from China, 0.01 percent from AGOA countries, and 1.3 percent from all least developed countries, including AGOA. The failure to make a decision regarding other GSP-eligible countries … leaves companies with few options but to source from the super-competitive China.”

They urged the USTR, “in the strongest possible terms, to make all 28 travel good items eligible for the benefits of GSP for all beneficiary countries as soon as possible to resolve the significant commercial uncertainty and policy incoherence that the Administration’s partial decision has created.”

December 28, 2019 / No Comments /  
tax

Singapore’s Budget Should Refine Tax Incentives: Deloitte

Deloitte has said Singapore should improve tax incentives to support start-ups and ensure Singapore remains a competitive domicile for multinationals in the upcoming Budget.

Low Hwee Chua, Partner and Head of Tax Services at Deloitte Singapore and Southeast Asia, said: “As start-ups may not be profitable in the initial years, but instead would likely require funding, Deloitte Singapore suggests fine-tuning certain schemes to incentivize start-up investors, allow the continuation of tax losses incurred by start-ups, and enhance the loss carry-back regime. On the technology front, we are proposing tax incentives to support businesses in digitization and automation of their businesses, such as granting enhanced tax deductions for evolutionary innovative activities that strictly may not be considered as R&D, consultancy fees incurred for digitization projects, and software development activities.”

Noting the recent focus by tax authorities worldwide on international tax issues, Low said: “With the twin challenges of keeping our tax regime competitive and addressing the implications arising from the BEPS Project, a balance must be achieved between keeping Singapore’s tax system simple whilst ensuring that it remains coherent and acceptable in the international tax arena. Singapore should continue to monitor its tax incentives framework to ensure it adheres to the minimum standards that have been established, and may also wish to consider publishing more detailed guidelines on the criteria required to obtain certain tax incentives, as transparency is a key tenet of the BEPS Action 5 recommendations on harmful tax practices.”

In addition, Deloitte said: “Singapore will need to ensure the adoption of consistent transfer pricing approaches with its key trading partners and investor countries to reduce the potential risk of increased disputes between tax authorities pursuant to new transfer-pricing approaches put forth in the BEPS proposals.”

Deloitte also pointed out increasing competition for multinationals’ business. Deloitte said: “Singapore’s status as the region’s economic and financial hub is hard won and the country is constantly refreshing her value proposition to stay ahead of the curve. Likewise, Singapore needs to ensure that her suite of industry-specific tax incentives evolves in tandem with business developments.”

“For instance, both Singapore and Hong Kong are choice locations for multinationals to locate their treasury centers in Asia. Singapore’s finance and treasury centre (FTC) incentive has been instrumental in influencing companies to locate their treasury centers in Singapore, but this may be changing with Hong Kong introducing new tax measures in a drive to attract regional treasury centers.”

“Likewise, Malaysia and Thailand have introduced tax incentives for treasury centers and headquarter activities and in time may emerge as alternatives to both Singapore and Hong Kong. Deloitte Singapore is not only calling for the FTC incentive to be extended beyond March 31, 2016, but also for improvements to be made to keep the incentive relevant and useful with developments in treasury and financial activities globally,” said Michael Velten, Partner and Head of Financial Services Tax at Deloitte Singapore and Southeast Asia.

December 28, 2019 / No Comments /  
tax

Thai Tax Breaks To Lure SMEs Into Tax Net

Thailand has launched a new tax amnesty scheme designed to encourage small- and medium-sized businesses to move from the informal economy and register for income tax.

Under the program, which commenced on January 1, 2016, eligible SMEs will be exempt from corporate tax for 2016 and will pay half the regular 20 percent corporate tax rate for the subsequent year. In addition, qualifying firms will not be subject to prior year tax investigations by the tax authority.

To qualify for the reduced tax rates, companies must have had revenues of less than THB30m (USD830,000) in the 2015 accounting year. The company’s registered capital also must not exceed THB5m.

In another measure aimed at shrinking the size of the informal economy, banks have been forbidden from lending to companies which have not signed up for a tax account with the tax authority.

It is said that around 350,000 SMEs in Thailand meet the eligibility criteria for the amnesty, and the Government expects to collect an extra THB5bn per year from SMEs following the conclusion of the scheme.

December 27, 2019 / No Comments /  
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OECD Seeks Input On 13 New Dispute Resolution Peer Reviews

The OECD is seeking input from taxpayers on dispute resolution mechanisms in place in Aruba, Bahrain, Barbados, Gibraltar, Greenland, Kazakhstan, Oman, Qatar, Saint Kitts and Nevis, Thailand, Trinidad and Tobago, the United Arab Emirates, and Vietnam, as part of follow-up work under BEPS Action Plan Action 14.

Improving the tax treaty dispute resolution process is a top priority of the BEPS Project. The Mutual Agreement Procedure (MAP) peer review and monitoring process under Action 14 of the BEPS Action Plan was launched in December 2016, with the peer review process of the first nine batches now underway. Input is now being sought on the tenth batch of peer reviews.

The peer review process is conducted in two stages. Under Stage 1, implementation of the Action 14 minimum standard is evaluated for Inclusive Framework members. Stage 2 focuses on monitoring the follow-up of any recommendations resulting from jurisdictions’ Stage 1 report.

The OECD is now gathering input for the Stage 1 peer reviews of the aforementioned territories. In particular, the OECD wants to hear from taxpayers about specific issues relating to access to MAP, the clarity and availability of MAP guidance, and the timely implementation of MAP agreements for each of the jurisdictions.

Taxpayers doing business in these territories are being encouraged to complete a questionnaire by December 16, 2019, at the latest.

December 24, 2019 / No Comments /