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Table 1. Major Taxes in the ASEAN, 2013
A. ASEAN Taxation
Taxes in the region in general, are not that high compared to other
regions and economic blocs around the world. The Philippines though,
is a bit problematic because it has higher and plentier taxes and fees
compared to its neighbors. For instance, while corporate income tax
rates for the nine other member-states are just 20 to 25 percent,
the Philippines has 32 percent. In personal income tax, the range
is wide, from zero in Brunei to 35 percent in Thailand and Vietnam.
The reform challenge for the Philippines and other ASEAN members
except Brunei, is to approximate Singapores low and simple tax rates,
17 percent for corporations and 20 percent for individuals.
Expanding to other economies in the Asia-Pacific region, this is how
the picture looks. The Philippines has one of the highest overall
tax rates in the region, along with Australia, Myanmar and Japan.
The colors brown-pink-orange represent profit tax,
labour tax, and other taxes, respectively.
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B. ASEAN Regulations
Regulations, restrictions and prohibitions are among the banes of entrepreneurship and job creation. Many regulators tend to think that things should not
move, no one should do something, unless they get our signatures and permit. If
the regulators can only do that philosophy and prohibitions to thieves,
murderers and other criminals, we should have a very peaceful world.
Below are two tables showing how bureaucratic, how easy or uneasy it is to do
business in selected countries in the Asia-Pacific. The Philippines is among the
hard/bureaucratic-to-do-business in the region. To start a business, it will take
or require 15 different procedures and permits from local to national
government agencies, lasting for 35 working days on average. To get a
construction permit, it will take about double these two numbers cited.
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Table 3. Ease and Unease in Starting a Business and Getting Construction Permits in ASEAN-9
5
Source:WB-IFC, Doing Business 2014 Report
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Table 4. Ease in Starting a Business and Getting Construction Permit in Developed Economies of Asia-Pacific
6
Source:WB-IFC, Doing Business 2014 Report
Acronyms below:
CEPT - Common Effective Preferential Tariff
CLMV - Cambodia, Laos, Myanmar, Vietnam
ASEAN 5 - Indonesia, Malaysia, Philippines, Singapore, Thailand.
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From 13 percent intra-ASEAN tariff two decades ago, it is now down to zero for
the ASEAN 5. CLMV is approaching the zero tariff very soon. And one result of
free trade policy being slowly implemented in the region is the high and
fast growth of merchandise exports as member-countries are
integrated more and more to the rest of the world.
The socialist, supposedly anti-capitalist economies of China and Vietnam, were
among the main beneficiaries of free trade and global capitalism and commerce.
In just 17 years, 1995 to 2012, Vietnams exports expanded 21x while that of
Chinas expanded almost 14x. In contrast, many of their neighbors exports
expanded by just 3x to 7x. Vietnam has twice the size of
exports compared to the Philippines in 2012.
Source: ASEAN Secretariat and the WB, 2013. ASEAN Integration Monitoring Report
Source: ADB, Key Indicators for Asia and the Pacific 2013, www.adb.org/statistics
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Chart 2. Non-Tariff Measures (NTMs) in
ASEAN by Type -- Officially Notified
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Table 7. Ease of International Trade, Developed Asia-Pacific plus USA and Germany
9
There is one trade agreement that is already in force in ASEAN, the ASEAN
- Australia - New Zealand Free Trade Area (AANZFTA). It is a
comprehensive and single-undertaking agreement that creates new
opportunities for the 620+ million peoples of the 12 countries which
have a combined economic output of USD 2.65 trillion.
D. Rule of Law
In the classical tradition and discussions of the role of government and
raison detre (reason for existence) of governments, rule of law and
protection of three basic freedoms freedom from aggression, freedom to
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own property and freedom of expression (right to liberty) stood out. Yet, in many
countries around the world, government corruption and lack of rule of law
is a perennial problem.
The World Justice Project has produced the Rule of Law Index annual reports. Nine
factors were considered in constructing the index: (1) Constraints on government
powers, (2) Absence of corruption, (3) Open government, (4) Fundamental rights, (5)
Order and security, (6) Regulatory enforcement, (7) Civil justice, (8) Criminal justice,
and (9) Informal justice. Below is the result for this years report.
Freedom Barometer Asia also has its ranking of countries based on (a) political freedom,
(b) economic freedom, and (c) rule of law. To get the score or index for rule of law, three
factors were considered: (1) Independence of the Judiciary, (2) Corruption, and
(3) Human Rights. Here is the result for countries in East Asia.
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Table 9. Rank and Score in Rule of Law Category, Freedom Barometer 2013
Source: http://freedombarometer.org/start-page/asia/ranking/
E. Concluding Notes
1. The Philippines and other Asian economies need to reduce and simplify their tax rates. Tax competition will
become the rule in the coming years along with exports and economic competition. Many businesses and professionals will flock to economies that offer low and simple tax rates.
2. Likewise, the Philippines and other Asian economies need to reduce bureaucracies that affect business. Entrepreneurship and job creation are not criminal acts that require lots of bureaucracies and permits from government.
3. Free trade results in cheaper products and services for the participating economies as it opens up plenty of opportunities where to buy important capital and consumer goods, and where to sell the same to other countries.
4. High number of laws in each country can be a hindrance to rule of law, if one will consider national or federal
laws (like Republic Acts) + state or provincial laws + city or municipal laws + village/barangay laws and ordinances.
Plus Executive Orders, Department or Ministry Orders, Administrative Orders by Bureaus, one is talking about tens
of thousands of laws and orders. This defeats WJPs Principle #2: The laws are clear, publicized, stable, and just....
The numerosity of laws alienate the ordinary people, hence the need to get lawyers
to understand those numerous laws and orders.
5. To encourage economic competitiveness of the Philippines and the rest of ASEAN, they need less taxation and
business regulations, more trade and rule of law.
ENDNOTES:
Presented at the forum, An Economic Reform Agenda for ASEAN Competitiveness,
Citizen Watch Pre-SONA Round Table, sponsored by Stratbase Research Institute.
Tower Club, 33rd Floor, Philam Life Tower, Makati City, July 23, 2014.
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