MAP supports incentives reforms

The Management Association of the Philippines (MAP) is supporting the government’s proposed rationalization of fiscal incentives under the second tax reform package, but said reforms should be worked out properly with investors who are currently enjoying the perks so as not to make them feel that rules are being changed in the middle of the game.

“Rationalization of fiscal incentives is an important objective which we support,” MAP national issues committee chair Eduardo Yap told

“The idea is to ensure that incentives are granted judiciously where needed to attract and keep investments to develop local economy, boost exports, earn foreign exchange, develop manufacturing capability and create jobs. But as usual, the devil is in the details,” he said.

Yap said the government as a general principle should provide a conducive environment with competitive fiscal incentives that would attract investments, and thereafter help attain sustainable viability.

But after the profitability of these investors becomes sustainable, he said it is fair to expect and require them to share in the cost of services rendered by the government such as security and infrastructure support.

As such, Yap said income tax holiday or exemption should not be indefinite.

“For new investors, this should not be a problem. But for existing investors enjoying income tax exemption indefinitely, a sunset provision must be worked out bilaterally with specific sectors and in such a manner that they will not feel the rules are being changed at midstream,” he said.

Reforms being proposed under the planned rationalization of fiscal incentives under the second tax reform package have been among the key concerns of the Philippine Economic Zone Authority and its industry locators.

Some foreign business groups have conveyed reservations in the proposals in fear of the country losing its competitiveness in attracting investments.

Aside from the rationalization of fiscal incentives, the second tax reform package will also include the reduction in the country’s corporate income tax rates.

Yap said the proposed lowering of corporate income taxes bodes well for the country as it will strengthen the competitiveness of businesses.

“TRAIN 2 is essential to complete the reform package. The current 30 percent corporate income tax is highest among peers in the region and must be reduced. Closest is 25 percent of Indonesia,” he said.

Yap said the MAP favors the 20 percent target of the House version, as the Department of Finance is for 25 percent.

“We would like to see a credible timeline for it with annual cuts ranging from minimum one percent to maximum two percent depending of fiscal performance during preceding year,” he said.

“Lower corporate income taxes will enhance competitiveness of businesses here relative to regional peers,” the business leader said.

MAP president Ramoncito Fernandez said the group’s next general membership meeting later this month would focus on knowing more about the sentiment of its members on TRAIN 2.