Longer shift sought for strong exporters
THE Department of Trade and Industry (DTI) is seeking high performing export-oriented companies a “longer transition period” on the rationalization of fiscal incentives under the proposed second package of tax reform.
In an interview, Trade Secretary Ramon Lopez said they were proposing a minimum of seven and a maximum of 10 years transition period for high performing and export oriented companies.
“As mentioned, we’ve been discussing with the DoF (Department of Finance) and I think there’s openness on letting a longer transition just to take into account the need for time for companies to adopt to a new system, new projects and give time for the development of new infrastructure,” said Lopez. for
Under the proposed Comprehensive Income Tax and Incentive Rationalization Act (Citira) bill, firms enjoying fiscal incentives before the effectivity of the Package 2 of the tax reform, will be allowed to avail such for a period of five years.
While the bill seeks to gradually reduce the corporate income tax from 30 percent to 20 percent, it also proposes to remove the 5 percent perpetual tax on gross income earned (GIE), which is currently being enjoyed by select firms.
Depending on how long a company enjoys the GIE, the Trabaho bill allows for a transition period of two to five years.
“There were concerns on the immediate impact on jobs, so that’s the reason why I said that with the [longer] transition, these can be minimized. We can allow maybe a minimum of seven and maximum of even 10 [years] for those high export oriented. Let’s say you’re 90 percent and above export oriented and employs maybe around 3,000 because those are big numbers in terms of job creation,” said Lopez.
He said, however, that he would be happy if a five to eight years transition period would be granted as long as the lowering of tax rates would be on track.
As a compromise, Lopez said that the GIE could be increased to seven percent to give the government additional revenues during the transition period.
“We are yet to meet with the DOF. These are just proposals,” he said.
Lopez said they were also proposing some changes in the structure of the Fiscal Incentives Regulatory Board (FIRB), a body which will have the power to grant or cancel fiscal incentives.
He said that on the structure, incentives of big-ticket projects with a certain peso value would be determined by the FIRB. Incentives of projects that fell below the said threshold on the other hand, could be determined by Investment Promoting Agencies.