(DP 1986-05) Revenue Mobilization and Responsiveness of Philippine Income Taxes: Implications for Fiscal Policy

TL;DRAbstract

One basic hypothesis in development finance is that the share of direct taxes, which includes taxes on personal and corporate incomes, increases as development proceeds. During the period 1961-1973, the share of income taxes to total taxes in the Philippines has grown in accordance with this basic hypothesis. A dramatic downturn, however, occurred in the late 1970s. One of the objectives of this study is to examine this phenomenon. The other specific objectives of the paper are: (a) to evaluate the resource mobilization potential of the corporate and personal income taxes, and (b) to measure and analyze the responsiveness of the individual and corporate income taxes to changes the incomes. On the basis of the results of our study, the following conclusions and implications for policy appear warranted. First, the observed decline in fiscal importance to both personal and corporate taxes relative to total revenues suggests that the tax structure that has emerged in recent years has been

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