Request for smarter tax policies: Why the Philippines must now undergo bold reforms
By Mon Abrea
Chief Tax Advisor of Asia Consulting Group
After the Philippines’ national speech in 2025, I offer this view, not as a politician or academic observer, but someone who works closely with taxpayers, policy makers, international experts and MSMEs to drive reforms that promote inclusive growth, responsible investment and public trust.
After recently completing a tax policy program at Duke’s Sanford School of Public Policy and building past work with international institutions and business communities, I believe this is the right time and opportunity to take action.
If we want a more competitive and fairer Philippines, we must start with a tax regime that rewards productivity, empowers small businesses and invites responsible foreign investment without putting unnecessary burdens on those who have already complied.
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Five policy priorities for changing the Philippines’ tax system
As 20Th The Philippines Congress has opened a new legislative session that provides a crucial opportunity to promote real tax reforms to balance fiscal responsibilities, ease of business and inclusive economic growth. Based on global best practices, local reality, and a decade of field experience, I respect the following five tax policy priorities:
- The minimum tax rate for self-employed and professionals (SEP) is 10%
Establish fair, predictable and administratively simple baseline taxes for self-employed individuals and professionals who currently contribute less to state income.
Despite large incomes, less than 3% of total income tax revenue comes from professionals, while less than 10% of self-employed people. By comparison, more than 85% of personal income tax collection comes from withholding taxes on individuals with fixed income.
The proposal attempts to:
- Promote equity and expand tax base
- Minimize tax evasion and insufficient taxes
- Encourage voluntary compliance through flat non-pressure rates
This is a practical and politically viable way to restore equity without increasing the burden on salaried workers or MSMEs.
- Risk-based digital audit system
Replace outdated, discretionary audit options with data-driven, risk-based frameworks and are powered by digital infrastructure. This will ensure that audit resources focus on high-risk, high-impact cases and reduce abuse and corruption in law enforcement.
Current audit-related and defective collections are less than 3% of total revenue, while 97% of tax collections rely on voluntary compliance. This reveals the inefficiency of the system and the need to specialize in tax enforcement.
This reform will:
- Eliminate arbitrary choices and harassment
- Improve taxpayers’ confidence
- Maximize collection efficiency through targeted law enforcement
Countries such as Estonia and Chile have demonstrated how digital audit systems can significantly improve compliance and transparency.
- Strengthen super IPA to simplify tax and investment processes
Authorizes Super Investment Promotion Agency (IPA) for all Registered Commercial Enterprises (RBES) with centralized authorization to regulatory processes, including national and local tax, customs, licensing and audit coordination.
This is one of the most cited concerns for foreign and domestic investors: splits, duplicate audits, and inconsistent local policies.
By institutionalizing super IPA, we can:
- Protect legitimate investors from regulatory friction and overlapping audits
- Reduce compliance costs and eliminate bureaucratic layoffs
- Align incentives with national development goals and ESG priorities
This approach reflects a successful model in Singapore and the UAE, where regulatory streamlining is the cornerstone of global competitiveness.
- Complete automation of tax management or institutional reform
Modernize the tax system through complete end-to-end digital transformation, or if necessary, abolish and replace the current tax agency with independent professional management agencies.
Corruption and inefficiency thrives in manual, discretionary systems. To build credibility and restore public trust, the Internal Revenue Agency (BIR) must either:
- Totally automated, minimizing human discretion; or
- Transitioning to a government-owned but privately managed agency, similar to the Inland Taxation Authority of Singapore (IRAS), its political intervention and a greater sense of professional responsibility.
This bold reform will:
- Improve taxpayer experience and reduce traditional Chinese tape festivals
- Prevent leaks and enhance data-driven decisions
- Signaling political will to real institutional change
- MSME’s simplified and layered compliance framework
Based on turnover, industry and capability, a graduation and proportional compliance system for micro, small and medium-sized enterprises (MSMEs) is adopted.
The problem is not only the tax rate, but the cost, complexity and fear of compliance. Many MSMEs and informal businesses avoid registration without tax evasion, but avoid complex rules, high fees and frequent inspections.
The simplified framework will:
- Encourage formalization and improve inclusion
- Reduce the burden of micro and marginal income
- Building a culture of trust, not fear
The Philippines is classified as more than 99% of MSME businesses, and simply empowering them through taxation is crucial for inclusive recovery and national resilience.
These five tax policy priorities aim to build a modern, investment-friendly and citizen-centered tax system; a person who collects equitably, effectively manages and supports long-term economic transformation.
These reforms are not only policy choices; they are economic necessities. Without a smarter, more inclusive tax system, we will continue to bear those who are already compliant while failing to obtain untapped revenue and foreign investment opportunities.
Reimagine the world: Start with taxes
These priorities are consistent with the core message of my book series, Reimagine the worldtrying to face the most pressing challenges in the world through systematic reforms. Volume 1, No corruptionlaunched at Harvard University. second, No climate changewill be released in Oxford in August this year. The last issue, No povertyto be published in 2025, focuses on eradicating poverty through inclusive economic and tax policies.
Tax policies are not just about collection. It reflects our national values and determines who bears the cost of development and who is abandoned. It can and must be a tool of fairness, resilience and empowerment.
Global efforts to influence globally
To facilitate this agenda, I will lead international tax and investment roadshows in the United States, Europe, Oceania and Asia, including stops in New York, Washington, DC, Los Angeles, San Francisco, London, Paris, Paris, Madrid, Milan, South Korea, South Korea, North Korea, Dubai, Sydney, Sydney and Melbourne.
The roadshow will include:
- Investment dialogue with foreign business offices and embassies
- Tax and policy briefings for global think tanks and foreign Philippine leaders
- emission Reimagine the world: No climate change
- Interactions with international partners position the Philippines as ESG consistent investment destinations
The world is observing how we reform and rebuild. If we want to be seen as a serious investment center, we must have a tax system that reflects capacity, consistency and a real commitment to inclusive growth.
As Sona concluded
In the president’s speech, there is no renewed commitment to real tax policy reforms, not only as tax measures, but as a fundamental pillar of good governance, economic justice and global competitiveness.
Let’s not waste another year of debate reform, we already know what we need. Let’s take action. Let us lead.
Let’s reimagine the Philippines and the world through smarter, bolder, and more inclusive tax policies.
Let’s get started.
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About the author:
Monbreya yes Global tax policy expert and founding chairman and chief tax consultant at the Asia Consulting Group (ACG), a leading tax consulting firm in the Philippines. He is a Harvard-educated civil servant and Oxford-trained climate policy expert, and recently completed a tax policy implementation plan at the School of Public Policy at Duke Sanford University to strengthen his work on shaping global tax reform, especially in developing economies such as the Philippines.
Abrea is widely regarded as the Philippines’ most prominent advocate of tax reform, working closely with policy makers, international organizations and foreign investors to modernize the country’s tax system, attract sustainable investments, and protect micro, small and medium-sized enterprises (MSMES). He is also the author of the Reimagining World Reading series, which reveals a world free of corruption, climate change and poverty.
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