Tax Reform in the Philippines
Gerardo P. Sicat
The Philippines undertook significant reforms of the tax system during the 1980s. Many changes also took place in the tax system during the previous decade, but these improvements were more or less structured on the widening of the tax net. This was done by expanding the coverage of taxed activities and commodities and by tax-rate adjustments, which were, on the average, mainly upward.
The reforms initiated in the 1980s were systemwide in nature, affecting first income taxation ( 1980, 1987), and then indirect taxation ( 1987). The earlier period of changes in the tax system, being piecemeal in character, had brought about a system that later required a more general reform.
The significant changes in the tax system took place during the second decade of the Ferdinand Marcos government. Further reforms were undertaken immediately after February 1986, when Corazon Aquino assumed power. It can be said that deep reforms in the tax system during the latter period were partly because of the ongoing studies of tax reform agenda from a previous period. There were, however, a few instances of reversal of earlier reforms.
The speed of tax reforms depends in part on political commitment. It is significant that the major changes in the tax structure took place during a watershed period in Philippine history in which the government structure was basically authoritarian. Probably, this provided greater scope for broad and faster changes. This is true of the tax changes that took place during the 1970s and it is also true of the reforms that were adopted in 1987. 1 The general trends in these systemwide reforms will be discussed in this chapter.