MANILA, Philippines – The Philippines imposes a 12% value-added tax (VAT), nearly double Thailand’s 7% rate, yet the two countries collect roughly the same amount of VAT relative to the size of their economies.

For the World Bank, this could suggest that the Philippines may not need higher headline tax rates as much as it needs to collect existing taxes more efficiently.

“Don’t increase tax rates. Just ask, how much are you collecting?” World Bank senior country economist Jaffar Al-Rikabi said during the launch of the Philippines Economic Update on Monday, August 3.

Al-Rikabi said the two economies have broadly similar levels of private consumption relative to gross domestic product (GDP). But despite Thailand’s substantially lower rate, its VAT collection as a share of GDP is comparable to that of the Philippines.

“What does that comparison tell you? It tells you that there’s a lot of room to improve the efficiency of the VAT without increasing rates,” he said.

The World Bank’s preferred approach is to broaden the tax base by simplifying compliance and collecting taxes more effectively from activities already covered by the system.

This comes as the government considers tax exemptions for workers earning less than P350,000 annually, while looking at higher or broader excise taxes on products such as sugary drinks, vapes, and single-use plastics to replace lost revenue.

Make paying taxes easier

One way to improve collection may be to just simply make it less difficult to pay.

“A lot of mistakes happen just because it’s so burdensome to go through the tax system,” Al-Rikabi said.

The Philippines already has an Ease of Paying Taxes law, but he said the bigger test is whether it is implemented effectively. International evidence shows that simplifying tax procedures can improve voluntary compliance because taxpayers make fewer errors and are less likely to delay filing or payment.

“You collect more revenue just purely because there’s fewer mistakes, it’s easier to pay, so people don’t put it off,” Al-Rikabi said.

The World Bank also recommended reviewing VAT exemptions. Exemptions are often created to lower prices or support particular groups, but they also shrink the tax base and can benefit people who do not need assistance.

Where an exemption doesn’t effectively help its intended beneficiaries, Al-Rikabi said the government may be better off collecting the revenue and directing it toward targeted programs such as the Pantawid Pamilyang Pilipino Program (4Ps).

The need for stronger collection has become more urgent after the COVID-19 pandemic.

National government debt stood at 65.2% of GDP in early 2026, compared with 39.6% in 2019. Meanwhile, tax revenues were equivalent to 14% of GDP in the first quarter, marginally below the same period in 2025.

In its latest report, the World Bank said higher tax revenue and more efficient spending will be needed to create room for investments in infrastructure and human capital without pushing debt up even further.

PH: Singapore on paper, red tape in practice

The Philippines’ tax collection problem is also symptomatic of another weakness in the government: though the country can write strong business regulations, it often struggles to implement them efficiently.

In the World Bank’s Business Ready assessment, the Philippines scored 71 out of 100 for the quality of its business regulations, nearly matching Singapore’s 72. The gap widened sharply, however, when the assessment measured what companies actually encounter.

“Converting good rules into delivery is the next test. Regulation on paper nearly matches Singapore; delivery trails it,” the World Bank said in a handout.

The Philippines scored only 53 for the public services supporting those rules, compared with Singapore’s 70, and 67 for operational efficiency, against Singapore’s 87.

The World Bank also pointed to the red tape businesses in the Philippines have to cut through just to open shop.

“Currently, it takes 76 days for a foreign firm to be registered in the Philippines. In Singapore, it takes one. So, working on that agenda, make it easier for firms. You’re going to get more, better firms,” World Bank lead economist Gonzalo Varela said on Monday. – Rappler.com