Eligible investors to enjoy incentives still
Foreign investors that are qualified and performing well will continue to enjoy incentives despite a pending bill in the Congress that seeks to reform the country's convoluted corporate income tax (CIT) system.
Finance Undersecretary Karl Kendrick Chua said the government's goal is to modernize the current set of incentives being given to a select group of businesses that only pay a "forever" 5-percent tax on gross income earned (GIE), in lieu of all local and national taxes, even if these favored companies have failed to generate more jobs or contribute to the economy.
Chua said this current system is unfair to about 90,000 active small and medium enterprises (SMEs) that pay the CIT of 30 percent, which is the highest in the region.
“We will continue to give incentives to those that perform. But we will start to include sunset provisions on the incentives of those that are not performing. So what is there to fear if you are performing, if you are contributing exports, contributing to countryside development, jobs and productivity?,” said Chua.
Chua said to make the CIT system fair and accountable, the administration is asking the Congress to reduce the CIT rate and rationalize the fiscal incentives system, which has become "inequitable and convoluted" as a result of 136 laws governing the grant of such investment perks, including those for 14 investment promotion agencies (IPAs).
Corporate tax reform comprises Package 2 of the Duterte administration's comprehensive tax reform program (CTRP).
The House of Representatives has already approved on third and final reading last Sept. 10 its version of the corporate tax reform bill known as the Tax Reform for Attracting Better and Higher Quality Opportunities (TRABAHO) Act. The Senate, meanwhile, has yet to approve its counterpart measure, which was authored by Senate President Vicente Sotto III and dubbed theCorporate Income Tax and Incentives Reform Act.
Chua urged the affected sectors to thoroughly read the measure, rather than base their positions on hearsay and opinions, so that they can work with the government in explaining the true benefits of this CIT bill to the public.
The DOF earlier identified a total of 645 registered enterprises that continue to receive tax incentives even after 15 years in the business, proving that investment perks given usually to big or multinational firms-- many of them "inherently profitable"--have already become redundant and unnecessary. /