The study compares and analyzes the degree of progressivity of the individual income tax structures of members of the Association of South East Asian Nations (ASEAN). Tax progressivity is typically linked to a tax schedule characterized by a rising rate as income rises. In particular, the tax structure is considered progressive if the marginal tax rates constitute an increasing function of income.
Among the ASEAN countries, Malaysia and Lao PDR have the most number of tax brackets, with nine each; while Cambodia, Indonesia and Thailand have the lowest, with five each. The Philippines is comparable to Singapore with seven brackets.
While most of the ASEAN countries impose a 0% rate, exempting certain levels of income, the Philippines and Indonesia start at the minimum rate of 5%. Vietnam has the highest maximum tax rate of 50% while Cambodia imposes only 20% as its highest rate.
In general, the ASEAN countries have designed a progressive tax structure, but the Indonesian income tax structure was found to have the highest degree of progressivity; followed by Vietnam and Cambodia while Malaysia has the lowest followed by the Philippines.
The findings show that having more tax brackets or high maximum tax rates do not necessarily enhance the level of progressivity. Rather, the more critical determinant of progressivity is the tax structure’s design particularly the provisions of accelerating increments in the tax rate and accelerated income interval widening for each succeeding bracket.
