On 13 July 2016 the IMF published a report following the conclusion of talks with the Philippines under Article IV of the IMF’s articles of agreement.

After slowing down in mid-2015 the Philippines economy grew at an annual rate of 6.9% in the first quarter of 2016. Consumption and investment have grown quickly but net exports have been held back by weak external demand. However the benefits of the strong growth and improved governance still need to reach the broader population.

The IMF proposes a comprehensive tax reform package for the Philippines. This could raise revenue to cover productive spending to “crowd in” private investment. The suggested reforms could raise economic growth to 7%-8% in the medium term.

The reforms could include simplification of the personal income tax rate structure; the indexation of tax brackets for inflation; and elimination of exemptions. The relatively low revenue ratio could be increased by higher excises on fuel; rationalization of the value added tax (VAT) exemptions; and imposition of excise tax on sweetened beverages. The tax reform could also include simplification and reduction of the corporate income tax rate structure and the rationalization of tax incentives.

Non-tax measures in the reform package could include enhanced infrastructure investment; liberalization of foreign investment and land use; and effective implementation of the competition law. The report also notes that the Philippines should tighten the anti-money laundering legislation and procedures, ease banking secrecy and make tax evasion a predicate crime.