TAX reforms are crucial for fostering economic growth, ensuring fairness and improving government revenue. By updating tax laws, governments can address changing economic conditions, promote investment and incentivize businesses.The Philippines closed 2023 with a robust growth rate of 5.5 percent, outpacing the thriving economies of China, Vietnam and Malaysia. Building on this momentum, the country's economy expanded by 5.8 percent in the first three quarters of 2024, positioning the Philippines as one of the fastest-growing economies in Asia.This year, we've seen significant Philippine tax reforms that were aimed at maintaining strong economic growth, attracting more foreign direct investments, simplifying tax systems and reducing inequality through fair tax collection. Let's recount the significant tax laws passed this year and what we should look forward to in the coming year.The year started on a high note as Republic Act (RA) 11976, also known as the Ease of Paying Taxes Act, was passed into law on Jan. 5. It introduced a more comprehensive and streamlined process designed to encourage timely payments and promote greater taxpayer compliance. Significant changes were implemented in the value-added tax (VAT) system, most notably harmonization of the timing for VAT recognition and documentary requirements for both the sale of goods and services.On Oct. 2, 2024, meanwhile, President Ferdinand Marcos Jr. signed into law RA 12023, or the VAT on Digital Services Law, that imposes a 12-percent VAT on digital service providers (DSPs) so as for the government to generate additional revenue.While the Digital Services Law is relatively not new, it strengthens the BIR's ability to collect VAT on digital services by outlining clear compliance measures for digital service providers. The law states that services provided by nonresident DSPs will be considered as performed in the Philippines if consumed there. It also makes DSPs, whether resident or nonresident, responsible for assessing, collecting and remitting the VAT on digital services consumed in the Philippines, in accordance with provisions on VAT withholding.Last month saw the signing of the Create More Act (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy), which aims to improve the nation's fiscal incentives policies as well as certain provisions of the earlier Corporate Recovery and Tax Incentives for Enterprise Act to provide more benefits for taxpayers.The new law expanded eligibility for tax incentives to include both local and foreign businesses, making the Philippines a more attractive investment destination. Under the law, VAT exemptions are clarified for goods and services directly related to registered projects, such as security, financial and marketing services. High-value domestic market enterprises with significant investments or export sales will also benefit as they can enjoy enhanced VAT benefits. Meanwhile, registered business enterprises enjoying tax incentives will pay a simplified local tax of up to 2 percent of gross income, reducing administrative burdens.Signed into law on Dec. 6, 2024, RA 120791 establishes a VAT refund mechanism for nonresident tourists in the Philippines. This law aims to maximize their spending power and promote the Philippines as a premier shopping destination, further boosting economic growth and the tourism industry.The refunds can be made electronically or in cash provided that the value of goods purchased per transaction is equivalent to at least P3,000. Additionally, goods purchased should be bought in accredited stores and taken out of the Philippines within 60 days of purchase.As we approach the new year, we also look forward to reforms that will help boost economic growth and promote long-term success for the Philippines. The following are the pending bills in the Senate:– Passive Income and Financial Intermediary Taxation bill. The fourth package of the Comprehensive Tax Reform Program is a priority measure of the Marcos Jr. administration. It seeks to simplify the tax system, reduce the number of final withholding tax rates, unify tax rates on passive income, harmonize business taxes on financial intermediaries, remove the IPO tax and rationalize the documentary stamp tax.– Act Enhancing the Fiscal Regime for the Mining Industry. The bill seeks to limit the interest expense deductions for metallic mining contractors with a debt-to-equity ratio exceeding 4:1 and aims to ensure fair revenue sharing from mining activities while promoting environmental responsibility and transparency. It also sets a 4-percent royalty rate for operations within mineral reservations and a margin-based royalty for operations outside and imposes a 0.1-percent royalty rate on gross output. The bill requires public disclosure of mining-related data, including tax and revenue information.– Capital Markets Efficiency Promotion Act. The proposed changes under this bill aims to align the Philippines' tax rates with neighboring Asean countries to attract more investors and to boost the Philippine capital markets. The provisions under the bill include a reduction of the stock transaction tax to 0.1 percent from 0.6 percent, aiming to lower trading costs and encourage more frequent transactions. Additionally, it seeks to reduce the dividends tax for nonresident aliens to 10 percent from 25 percent, aligning it with the rate for cash and property dividends. It also proposes lowering the tax on Philippine Charity Sweepstakes and lotto winnings to 10 percent from 20 percent as well as reduce the documentary stamp tax on horse race or PCSO lottery tickets to 10 percent from 20 percent.In rapidly changing economies, reforms are essential to keep up with global trends, attract foreign investments and strengthen the country's competitiveness on the international stage. With ongoing efforts toward economic reforms, improved fiscal policies and strategic investments, the future holds promise for growth and sustainability. By addressing key challenges and leveraging opportunities, the coming year offers the potential for a stronger economic foundation, greater job creation and an improved quality of life for Filipinos.Wendell D. Gahinhin is a practice leader for Tax Advisory & Compliance at P&A Grant Thornton. One of the leading audit, tax, advisory and outsourcing firms in the Philippines, P&A Grant Thornton is composed of 29 partners and 1,500 staff members. We'd like to hear from you! Connect with us on LinkedIn and like us on Facebook at P&A Grant Thornton and email your comments to pagrantthornton@ph.gt.com. For more information, visit our website at www.grantthornton.com.ph.