The Philippines Tax Reform Act of 1997

by Evan Centanni
The 1997 reforms reduced the income tax rate for corporations in the Philippines.

The Philippines are a group of islands in Southeast Asia which have been an independent country since 1946. Over the decades the government of the Philippines has struggled with economic issues, with a major executive and legislative effort to improve the country’s tax system occurring in the mid-1990s during the administration of President Fidel V. Ramos.

The Comprehensive Tax Reform Program

Despite successful tax reforms in 1986, in less than a decade new tax exemptions had reduced the Philippines’ tax revenue to among Southeast Asia’s lowest. In February 1994, a presidential task force was charged with developing a new Comprehensive Tax Reform Program (CTRP) to increase revenue by adjusting and simplifying the tax code. Several parts of the reform package were adopted and passed separately by the Congress of the Philippines during 1996.

The Tax Reform Act of 1997

Republic Act No. 8424 of the Tax Reform Act of 1997 was passed in December 1997, in the midst of the Asian financial crisis. It implemented a gradual rate reduction from 35 percent to 32 percent for both corporate income and the top margin of individual income. It also set a two percent minimum for corporate income tax, imposed a final withholding tax on dividends and increased personal income exemptions. However, key provisions of the CTRP recommendation were missing from the final act. Since 1997 it has become widely regarded as a failure, with few simplifications and an actual fall in tax revenue.

About the Author

Evan Centanni specializes in world cultures and human geography. He grew up in Oregon, but has since lived in two other countries and traveled to many more. Centanni is editor of Political Geography Now at www.polgeonow.com. He holds a Bachelor of Arts in international studies and linguistics from the University of Oregon.

Photo Credits

  • Jupiterimages/Photos.com/Getty Images