The government should consider implementing a simplified taxation system and review its incentives program to improve the country’s business environment, speakers at The Manila Times 3rd Business Forum said.

IMF Resident Representative Shanaka Jayanath Peiris said the present tax perks system had made doing business in the Philippines difficult, particularly for the small and medium enterprises (SMEs) that account for most of businesses in the country.

Marivic Espano, chairperson and chief executive officer at Punongbayan & Araullo (Grant Thornton), for her part said the present taxation system was “too convoluted” such that its interpretation was difficult for both domestic and foreign businesses.

Peiris, speaking at the sidelines of the forum, said: “Under the present taxation regime, the big corporations have tax incentives or exemptions. One other way to do this to rationalize those incentives for the big corporations and exporters.”

The government, he said, should work on achieving a “more level playing field so that everybody benefits, including the SMEs, because right now, SMEs may be disadvantaged because the big corporations and exporters have these incentives but some of the SMEs do not,” Espano, also at the sidelines of the forum, said: “Our present tax system is too convoluted … it is susceptible to many interpretations.”

“[As] to when and how to interpret … is left to the discretion of the taxing authority, which in turn, changes from time to time,” she added.

Simplification, Escano said, will allow businessmen to focus on growing their respective enterprises instead of worrying about the tax implications of every transaction they enter into.

“Most investors and businessmen are willing to comply with their respective tax liabilities, but the problem is with the present system, interpretation of tax laws changes from time to time. We need it to be much stable,” she said.

“Investors do not want the rules to change in the middle of the game. For example, the PEACE bonds, it was introduced to investors to be exempt from interest earnings tax. That was why several investors availed of this bond float program. Then when it fell due and demandable, the tax authority says it is not exempt,” Escano noted.

The Supreme Court last year ordered the government to return a 20 percent final tax imposed on holders of a controversial bond offering staged over a decade ago.

“[T]axation rules must be simplified so that there is no more room for many interpretations. That way, it will not change every time the new administration comes in, since the President is entitled to appoint its tax administrator each time,” she said.

As published in The Manila Times dated 23 February 2016 by Katrina Mennen A. Valdez