Finance dep’t claims backing of business groups for tax reform package 2

THE DEPARTMENT of Finance (DoF) said that it has received letters of support from business and civil society groups on the second package of the comprehensive tax reform package.

Following the start of the deliberations for the new tax program on Tuesday, the DoF issued a statement yesterday that several groups back the reduction in corporate income tax rates and the modernization of the investment incentives to enhance the country’s competitiveness within the region.

The Management Association of the Philippines (MAP) in a letter to Mr. Dominguez, said: “We agree with the need to rationalize and modernize the tax incentive system to make incentives timebound, performance-based, and not excessively complex with far too many different, even overlapping laws, rules and regulations.”

The Federation of Indian Chambers of Commerce ( Phil.) Inc., meanwhile, said that it supports the reform measure “insofar as it seeks to lower the corporate income tax (CIT) rate, rationalize the country’s tax incentives programs, and broaden the tax base and increase revenues that will support the administration’s initiatives.”

The Samahang Industriya ng Agrikultura said it “supports investments and public incentives that will boost the agriculture industry, improve efficiency, increase productivity, promote rural livelihoods and ensure the country’s food self-sufficiency.”

The DoF proposes to cut the corporate income tax rate by 1 percentage point gradually from 30% to 25% on the condition of savings equivalent to 0.15% of gross domestic product, or P26 billion, from rationalizing tax incentives. Meanwhile, House Bill 7458 seeks an annual unconditional 1 percentage point cut to the CIT until it hits 20%.

Reform proposals would have the effect of repealing 123 investment incentive laws. Incentives granted by 14 investment promotion agencies are to be harmonized with the government’s medium-term Strategic Investment Priority Plan (SIPP), producing an omnibus incentive code to be administered by the Fiscal Incentives Review Board (FIRB). The reforms also hope to replace the 5% gross income earned ( GIE) tax in lieu of all taxes with a 15% rate on net taxable income over five years; disallowing the use of value- added tax exemptions as an investment incentive; and expanding the coverage of the Tax Incentives Management and Transparency Act.

The DoF, together with the Philippine Chamber of Commerce and Industry, conducted nationwide road shows in the three months to March to consult stakeholders on the second tax reform package.

The second public hearing on the measure at the House ways and means committee will focus on private-sector concerns, after the airing of government agencies’ positions in the first hearing on Tuesday. —