MSMEs supporting corporate tax reform
Majority of micro, small and medium enterprises (MSMEs) are supportive of the Tax Reform for Attracting Better and High-Quality Opportunities or TRABAHO bill currently pending in the Congress, the Department of Finance (DOF) has reported during a recent Cabinet meeting in Malacañang.
This was based on the results of independent, third-party surveys conducted during the series of “Sulong Pilipinas” forums organized by the government and held in key cities in the country last November 2018.
The surveys showed that 91 percent of the micro, small, and medium enterprises that answered the questionnaires given to them during the series of forums expressed their full support for the TRABAHO bill, said Finance Assistant Secretary Antonio Lambino II in his report before the Cabinet.
Lambino has been a prime mover of “Sulong Pilipinas” since it was first held in Davao City in June 2016.
TRABAHO bill is the second package
of the Duterte administration’s Comprehensive Tax Reform Program (CTRP) that aims to reduce corporate income tax (CIT) and rationalize fiscal incentives, especially for MSMEs that account for more than 99 percent of local businesses and 63 percent of jobs.
CTRP's first package – the Tax Reform for Acceleration and Inclusion (TRAIN) Law – took effect January last year and slashed personal income tax (PIT) rates for the benefit of 99 percent of taxpayers, but raised the excise taxes on tobacco products, fuel, automobiles, and sweetened beverages to support public health and environmental goals and also broaden the revenue base.
Finance Secretary Carlos Dominguez III earlier said the reduction in CIT would benefit more than 99 percent of corporations in the Philippines, but a small percentage of businesses representing the “interests of a few” has opposed the move to rationalize fiscal incentives that have for long benefitted them.
Dominguez said the CIT would gradually be reduced from 30 percent to 20 percent to bring the Philippines closer to the regional average. He said having a CIT rate higher than those of neighboring economies at 30 percent was a barrier to investments.
A companion measure of this package is the rationalization of fiscal incentives. He said, for years, the government has relied on granting fiscal incentives as a means to attract foreign direct investments (FDIs).
A select group of big firms, many of them in the country's list of Top 1000 corporations, enjoy discounted CIT rates of 6 percent to 13 percent while most companies, including small enterprises, pay the steep rate of 30 percent. The favored big corporations have also been enjoying other tax perks for as long as 40 years already.
The same “Sulong Pilipinas” surveys also showed that 92 percent of micro, small and medium-sized enterprises (MSMEs) considered the TRABAHO bill an “important” factor “in the development of the country.”
SMEs also listed a number of recommendations during the forums that they think would improve the ease of doing business in the country and further improve economic growth in the long run.