Ex-DOF chief Purisima backs corporate tax reform
To improve competitiveness
Former Finance Secretary Cesar Purisima has underscored the necessity of instituting long-overdue reforms in the corporate tax system to bolster the country’s competitiveness.
As he expressed full support for the proposal to modernize incentives for businesses and reduce the corporate income tax (CIT) rate, Purisima said that House Bill No. 7458, or the second tax reform proposal, will improve the collection efficiency of revenue agencies.
Purisima also congratulated his successor, Finance Secretary Carlos G. Dominguez III, for the enactment into law of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the first package of the Duterte administration’s comprehensive tax reform program.
“[TRAIN] was a resounding victory for our economy and has set us on a path to fairer and faster growth,” Purisima said. “I wish you even more success as you shepherd the passage of Package 2.”
“I am happy to see the credit watchers have noted the decisiveness with which the government — with your leadership — further strengthened our fiscal base in preparation for a surge of public investments,” Purisima said in his letter to Dominguez dated April 17.
The Package 2 of the CTRP, which is now pending in the House of Representatives, aims to lower CIT rates while modernizing investment incentives to level the playing field for 95 percent of business enterprises in the country.
“While corporate income tax rates are relatively high in the Philippines, tax efficiency is quite low. Thus, lowering rates while expanding the tax base and improving (through simplifying) compliance is indeed the best way to address this challenge,” Purisima said.
Purisima, who is now the Asia fellow for the California-based think tank Milken Institute, said “the DOF’s (Depart-
ment of Finance’s) proposals for Package 2 come from a sound understanding of our remaining constraints to growth and a reasoned judgment on what needs to be done to overcome them.”
He noted that the reforms proposed by the DOF under Dominguez’s leadership “have been a long time coming, and are critical for the country to bolster our competitiveness.”
The former finance chief told Dominguez he was expressing on record his “full support (for)) the administration’s efforts to make the tax system fairer, simpler and more efficient.”
“I am proud to continue supporting the government’s comprehensive tax reform program,” Purisima said.
According to DOF spokesperson Assistant Secretary Paola Alvarez, reducing the CIT rate and modernizing business incentives will level the playing field for over 800,000 registered local corporations that have been paying regular taxes.
Of the estimated 5,000 companies with registered activities in the 14 investment promotion agencies (IPAs) in 2015, about 3,000 firms registered under the Philippine Export Procession Zone Authority (PEZA), claimed tax incentives amounting to more than R300 billion combined, not including estimates of potential leakages and cost of local tax incentives.