2024 has been a year marked by steady growth and resilience amidst challenges. In my previous article, I discussed the tax reforms implemented last year, as well as the upcoming laws we should anticipate in the new year. As these reforms foster economic growth and drive the future of the Philippines, it’s crucial that we remain proactive in addressing these opportunities and the challenges that come along with them.
With the Bureau of Internal Revenue’s (BIR) incremental improvements to the Philippine tax landscape, primarily through the implementation of Republic Act No. 11976, or the Ease of Paying Taxes (EOPT) Act which brought significant amendments to the National Internal Revenue Code, we’re on the right track. However, we must not become complacent.
One of the challenges cited by the World Bank in their Philippines Economic Update Report released on December 12, 2024 , is that “the increase in revenues needed to meet the government’s fiscal consolidation program will require additional tax policy measures beyond those currently planned.” This underscores the need for the continuous evaluation and refinement of our tax system to ensure that it remains responsive to the evolving economic and social needs of the country.
As we open a new chapter and seek to continue the momentum brought about by last year's developments, let's evaluate the progress made for the Philippine tax landscape in 2024 and address the challenges and setbacks we must remedy for the new year.
Incremental steps towards accessibility, digitalization
One of the key developments last year was the implementation of the Ease of Paying Taxes Act, which was signed into law on January 5, 2024. Now, a year into the implementation of EOPT, it is evident that the Act contributes significantly to increasing government revenues, which in turn supports the country's ongoing economic growth. The reforms brought about by the Act are a significant step in the right direction toward encouraging Filipino taxpayers and businesses to comply and voluntarily fulfill their tax obligations. We have yet to see the full impact of EOPT's provisions, but we can anticipate that these reforms will continue to foster a more conducive environment for tax compliance.
2024 also saw the passage of two key pieces of tax legislation, namely the Value Added Tax on Digital Services Law (R.A. No. 12023) and the CREATE MORE Act (R.A. No. 11534), bringing about significant reforms to the Philippine tax landscape that address the digital economy and spur economic growth.
The VAT on Digital Services, signed into law on October 2, 2024, aims to equalize the tax obligations of overseas digital service providers (DSPs), improve revenue collection, and ensure fairness in our tax system. Meanwhile, the CREATE MORE Act, following up on the CREATE Act, was signed into law on November 11, 2024, encouraging businesses to invest in the country by enhancing the tax system for businesses and industries.
As we continue to keep up with the digital age amidst emerging technologies such as AI, the tax landscape must continue to evolve. This necessitates a proactive approach to tax policy, anticipating and addressing the challenges and opportunities presented by these advancements.
Addressing setbacks
Last year brought many incremental changes for the better, but it also highlighted key issues that we have to address moving forward. Specifically, the government pushed back key tax reforms, such as the revised Passive Income and Financial Intermediary Taxation Act (PIFITA) Bill and the excise tax on single-use plastics. Early last year, the Department of Finance presented their proposal on package 4 of the Comprehensive Tax Reform Program (CTRP), formerly known as the PIFITA, or House Bill No. 4339.
In November, the proposal underwent further amendments and is now known as the Government Revenues Optimization through Wealth Tax Harmonization (Growth) Bill, which is projected to bring in additional revenue of P300 billion by 2030, according to Finance Secretary Ralph Recto. These proposals, which are currently awaiting a second reading, seek to “harmonize the taxation of passive income and financial intermediaries by reducing and simplifying the complicated tax rates on financial transactions.”
Aside from this, the government was urged to rethink the proposed tax on single-use plastics, which was projected to yield P34 billion over the next years. The proposal, which seeks to impose a PHP 100 per kilogram excise tax on single-use plastic bags, remains pending. Due to these delays, the Philippines' projected 2025 revenues from priority tax measures have been scaled down, instead relying on growth from non-tax revenues.
Legislative delays, implementation challenges, and public acceptance pose key challenges to the implementation of these tax reforms. As illustrated by the lessons we learned last year amidst the implementation of these key legislations, organizations and individuals alike play a key role in the push for reforms and successful implementation. Throughout the previous year, the BIR issued several Revenue Issuances to guide taxpayers during the implementation of the law, including Regulations, Memorandum Orders, and Memorandum Circulars, that clarified the provisions and requirements for complying with these acts. Alongside this, many organizations, including our Firm, P&A Grant Thornton, provided resources such as webinars, infographics, and articles to educate taxpayers on their implications. Likewise, as taxpayers, let’s do our part to stay engaged in this process by staying compliant, involved, and supporting these reforms that will bring about positive change.
Towards continued progress
As we start anew in 2025, our goal remains the same: to learn from the setbacks that hindered the full potential of our growth last year. Further legislation to improve the Philippine tax landscape is crucial in ensuring that our system remains responsive and ahead of the challenges we face today.
Among the upcoming reforms are PIFITA, mentioned earlier, as well as the Capital Markets Efficiency Promotion Act (CMEPA). These bills align with existing laws that aim to drive investment, streamline processes, and enhance our country's competitiveness in the international market. Aside from this, an overhaul of previous mining tax systems is coming with House Bill 8937, or the Act Enhancing the Fiscal Regime for the Mining Industry. This act aims to ensure fairness from revenue sharing while maintaining sustainability and environmental awareness.
The road toward continued growth remains clear: with continuous dialogue between the government and taxpayers, consistent policy implementation, and a focus on technology and innovation, we can create a more efficient and equitable tax system that supports sustainable economic growth. Heading into 2025, let's strive to support further initiatives that will bring about a more efficient, equitable, and accessible tax system. Stay compliant and stay ahead, taxpayers!
As published in The Manila Times, dated 22 January 2025
