Gov’t, PCCI to feel pulse on tax reform

THE GOVERNMENT has teamed up with the Philippine Chamber of Commerce and Industry (PCCI) for a nationwide road show this quarter designed to drum up support for Republic Act No. 10963 — the first of up to five planned tax reform tranches — and to feel businessmen’s pulse on the proposed second package that cuts the corporate income tax (CIT) rate and streamlines fiscal incentives, the Department of Finance (DoF) said in a statement yesterday.

DoF said it is undertaking the effort in partnership with the Participatory Governance ClusterOpen Government Partnership led by the departments of Budget and Management and of Interior and Local Government as well as with PCCI, and with the support of the United States Agency for International Development’s Facilitating Public Investments Project.

RA 10963, or the Tax Reform for Acceleration and Inclusion Act that was enacted on Dec. 19 last year, cuts personal income tax rates and offsets the expected foregone revenues by hiking or introducing consumption taxes on fuel, automobiles, sugar- sweetened drinks, tobacco products, coal, minerals, cosmetic surgery and some investment products, among other items. The enacted version of this first package is estimated to yield some P90 billion in additional revenues in the first year of enforcement, down from P133.8-157.2 billion originally after provisions were toned down.

The DoF submitted to the House of Representatives on Jan. 15 the second package, which will cut the CIT rate gradually to 25% from 30% over the next five years in order to put the Philippines at par in this regard with its closest Southeast Asian competitors like Indonesia, Thailand and Vietnam and will make up for the foregone revenues by scrapping redundant fiscal incentives that have been costing the government some P300 billion a year. The DoF hopes to secure this package’s enactment in time for start of enforcement in January 2019.

The department said the planned “caravan” will preach the merits of tax reform in Bacolod City (Jan. 31), General Santos City (Feb. 7), Subic/Clark (Feb. 13), Zamboanga City ( Feb. 21), Makati City (Feb. 28), Cebu City (Mar. 2), Baguio City (Mar. 7) and Tacloban City (Mar. 23).

DoF Undersecretary Karl Kendrick T. Chua and Assistant Secretary Ma. Teresa S. Habitan will lead speakers from the government, while lawyers Tomasa “Tammy” H. Lipana and Benedicta “Dick” Du- Baladad, co-chairpersons of PCCI’s taxation committee, will represent

the business sector. Lawmakers from both chambers of Congress have also been invited to speak in the road show.

The DoF statement quoted PCCI President Ma. Alegria S. Limjoco as saying that the road show will “solicit… business sentiments and positions on the proposed tax measure.”

“We fully recognize the efforts of government to raise revenue to support its infrastructure projects and we hope that the proposed measure, once passed into law, would be beneficial for everyone,” she said.

It also quoted Ms. Du-Baladad as saying “[i]t is high time the granting of tax incentives is rationalized to remove the redundancies and make incentives clearer and more accountable.”

DoF’s proposed bill will repeal 150 laws granting fiscal perks and replace them with an omnibus law covering the 14 investment promotion agencies.

At the same time, PCCI Taxation director Edgardo Lacson said: “We cannot discount the fact that our country has the highest corporate income tax rate in ASEAN (Association of Southeast Asian Nations).”

“There is a need to reduce the rates to a level that will make us competitive in a field of countries competing for the same direct investment funds.”

But Tax Management Association of the Philippines President Raymund S. Gallardo said last Sunday that DoF’s plan to make the graduated CIT rate cut contingent on the raising of at least P26 billion per year from a streamlined fiscal perks regime could turn off investors. —