Abrea: Slashing corp tax is ‘urgent and necessary’
While investors are spooked by a government proposal to scale back tax incentives, a tax expert pointed out that slashing the country's corporate tax rate is more "urgent and necessary."
Raymond Abrea, president of tax consultant Asian Consulting Group, said the lowering of corporate income tax is both urgent and necessary given the Philippines has the highest rate in Southeast Asia at 30 percent while Singapore which ranks first in ease of paying taxes and doing business among ASEAN countries impost only 17 percent corporate income tax.
"However, the fiscal incentive rationalization should not be used to delay or as a prerequisite to the adjustment of corporate income tax as only less than 1% benefits from the tax incentives while 99 percent of registered corporations are paying regular corporate income tax at 30 percent," the tax reform advocate told The FREEMAN.
The Philippines is in the midst of an ambitious tax reform to raise revenue to help fund its P8-trillion infrastructure plan.
But a part of the proposal, under the second package of the Tax Reform for Acceleration and Inclusion (TRAIN), is to cut income tax holidays and duty-free imports, causing uncertainties among investors.
The government had also passed TRAIN's first package which brought down personal income taxes but raised taxes on fuel and sweetened beverages. The new tax bill has also been blamed on the rising prices of basic goods, which has put so much pressure on ordinary consumers.
Abrea pointed out it is important the Joint Oversight Committee of both the Congress and Senate "convene and study the real impact of TRAIN 1 and to make sure TRAIN 2 won't suffer the same issues on implementation."
The tax expert also believes the incentive rationalization is to make the country's tax system fairer and more efficient by broadening taxpayer base with fair tax rates applicable to all.
"But we need to engage affected locators and foreign companies who will be affected by the transition from 5 percent gross income taxation to 15 percent corporate income tax," he said. Both TRAIN 1 and 2 are part of the government's Comprehensive Tax Reform Program.
"I wish to put forward the importance and urgency of introducing more tax administration reforms such as online or paperless tax compliance, risk-based audit with accountability on the part of examiner issuing tax assessment, online accounting, and tax system in lieu of manual bookkeeping, and increasing salaries of BIR personnel," he noted.
"Most companies are confused whether TRAIN is favorable or unfavorable to their businesses, but instead of fearing BIR and consequences of tax reform, I encourage all taxpayers both individual and corporations to be more proactive and do tax planning so they can take advantage of the benefits of tax reform," Abrea further explained.