The Philippines faces challenges in tax collection with a low tax-to-GDP ratio of 14.1% in 2023, far below regional averages. While the Bureau of Internal Revenue has implemented campaigns like RATE and RAFT, experts call for smarter, sector-based enforcement to combat evasion and corruption. Stronger coordination between agencies like PEZA and BIR is essential to prevent leakages in special economic zones.
Despite economic growth averaging 5–6% in recent years, the Philippines’ tax-to-GDP ratio stood at 14.1% in 2023. This remains significantly below the OECD average of 34% and the Asia-Pacific region’s average of 19.5%. In fact, at 14.1%, it is lower than several regional neighbors, including Thailand at 15–17% depending on the methodology.
The Bureau of Internal Revenue (BIR) has made progress through campaigns like RATE (Run After Tax Evaders) and RAFT (Run After Fake Transactions). But if serious about fighting corruption, closing loopholes, and financing sustainable development, sector-based enforcement that matches the country’s GDP profile and industry risks is needed.
Under the CREATE MORE Act, the Philippine Economic Zone Authority (PEZA) plays a critical role as the gatekeeper of tax incentives, ensuring that income tax holidays (ITH), the 5% special corporate income tax, VAT zero-rating, and more are granted only to compliant firms. Stronger coordination between PEZA and BIR can prevent leakages such as misdeclared exports or abuse of VAT exemptions, while still protecting the country’s competitiveness in attracting investors.
"In this way, incentives serve their purpose of fueling genuine economic activity instead of becoming grey areas for tax avoidance." Other countries offer models: Brazil closed VAT gaps through electronic invoicing; Estonia integrates tax, social security, and banking data into one digital identity system; South Korea links government procurement directly to tax reporting, reducing corruption.
"The Philippines doesn’t need higher tax rates; it requires smarter enforcement," says Mon Abrea, CPA, MBA, MPA, founder and Chief Tax Advisor of the Asian Consulting Group (ACG). When money is lost to corruption or tax evasion, every peso represents a missed opportunity for classrooms, hospitals, and climate resilience initiatives. A Philippines free from corruption, climate change, and poverty starts with a functional tax system ensuring everyone contributes their fair share.