DOF seeks end to ‘indiscriminate’ perks
Tax incentives must not be given indiscriminately at the expense of the country’s skilled and hardworking talent pool as well as infrastructure buildup, the Department of Finance (DOF) said yesterday.
Finance Undersecretary Karl Kendrick T. Chua said that while the government recognizes the value of tax incentives in business, such multibillionpeso worth of annual perks should be prudently given to sectors really in need of help from the state.
Instead of indiscriminate incentives, Chua said the government should invest in investment hub, skilled and hardworking talent pool and infrastructure buildup.
Chua noted the country’s sizable chunk of small and medium enterprises (SMEs) also deserve to be treated fairly — more so because they, together with micro-enterprises, employ the majority of Filipino workers in the countr.
That is why the government is seeking reforms in the grant of fiscal incentives that are enjoyed by only a select number of businesses, many of them in the list of the Philippines’ Top 1000 corporations, he said.
Based on the DOF cost-benefit analysis, only half of corporations currently enjoying incentives actually deserve such tax breaks, while the other half do not need such privilege as they are already profitable even if they pay the regular corporate income (CIT) rate of 30 percent.
The 30 percent CIT, which is the highest in the region, is the rate paid by most local firms, including 90,000 SMEs that, alongside around 800,000 microenterprises, employ 65 percent of the country's labor force.
“Far from the claim that we are killing the goose that lays the golden egg, we want to reform our current tax system so that the fattened goose may share its food with everyone else,” Chua said.
Chua said the proposed reforms in corporate taxation seeks to sharpen the competitiveness of the tax incentives package by introducing a combination of income tax exemptions, reduced income tax rates, and several additional deductions.
This modernized incentives package is designed to “directly incentivize job creation,” the purchase by investors of capital goods and local goods, and investments in long-term infrastructure, Chua said.