REFORMS IN CORPORATE INCOME TAXATION
Reduction of the corporate income tax on corporations
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REFORMS IN CORPORATE INCOME TAXATION Reduction of the corporate income tax on corporations |
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The phased reduction of the corporate tax, under the Comprehensive Tax Reform Program (CTRP) enables the country to become competitive with its Southeast Asian neighbors which have much lower corporate tax rates compared with the country. For instance, Indonesia only imposes a corporate tax of 30%; Malaysia, 30%, Singapore, 27%; and Thailand, 30%.
The corporate tax schedule is as follows (Sec. 27)
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Under CTRP |
Under Old Tax Code |
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Effective January 1, 1998 |
34% |
35%(pre-1998) |
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Effective January 1, 1999 |
33% |
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Effective January 1, 2000 |
32% |
A lower tax rate of ten percent (10%) applies to non-profit educational institutions and hospitals.
Rationalization and Control of Deductions
The CTRP broadens the base of the tax system by instituting controls on deductible expenses, which are often subject to the use of discretion by the taxpayer and tax examiner. Such discretion can lead to abuses and tax avoidance practices. They also give rise to tax shelters resulting to leakages and loopholes in the tax system. Such leakages are the biggest source of distortions and unfairness of the tax system.
