Businesses worried about dealing with LGU taxes separately — Angara

A SENIOR SENATOR said businesses prefer to deal with the issue of local government unit (LGU) taxation via a unified national tax for economic zone locators under which the national government collects the tax and credits the LGU with their share.

Senator Juan Edgardo M. Angara, who was speaking in the context of deliberations on the Tax Reform for Attracting Better and Highquality Opportunities (TRABAHO) Bill, said businesses prefer having a uniform policy across the country that does away with the need for them to deal separately with LGUlevel taxes, where enforcement may vary by locality.

“What we’re hearing a lot is they really prefer (local taxes) to be folded in. It can be very unpredictable if the treatment in one locality differs from another,” he said, noting that businesses prefer. What they want is to keep the 5% GIE (gross income earned), from which the LGU share is paid,” Mr. Angara told reporters on the sidelines of the International Innovation Summit 2018 on Monday in Taguig City.

At present, 2% of the 5% GIE tax incentive enjoyed by locators of the Philippine Economic Zone Authority (PEZA) goes to LGUs.

Businesses are “willing to accept a higher [rate] as long as they continue to not have to deal with so many agencies and government ordinances,” he added.

Asked if this rate could rise under the proposed bill that aims to modify the current incentives regime, Mr. Angara said: “That’s what the government wants,” referring to the Department of Finance’s desire to move companies to a higher corporate tax rate that will eventually fall from current levels. He declined to discuss what the final rate or tax treatment might be.

Mr. Angara, who chairs both the Ways and Means and Local Government Committees, said proposals to remove the LGU share would subject PEZA locators to real property taxes. Their current arrangements exempt them from local taxes as long as the LGUs get a cut of the GIE.

“The companies that have established their operations would be subject to real property tax. That was not factored in when they came here. That is like changing the contract. In a way, they will be disadvantaged, which would be unfair,” Mr. Angara added.

He added that the requests of the business sector to lengthen the transition period to 10 years from the current five-year-maximum is more suitable for making forecasts on their operations.

“Were looking whether it is acceptable for both sides. I see my job as a facilitator, bringing people together so no side is treated unfairly,” he added.

Asked if the TRABAHO bill will be passed this year, Mr. Angara said: “We’ll see. We are also dealing with the budget,” adding that Senate is looking to get a sense of the sentiment of stakeholders in the wake of the economic challenges they currently face.

“We don’t want to rush it given the global economic situation,” Mr. Angara said, citing the trade tensions between China and the United States and the Philippines’ widening trade deficit and rising inflation.

“We would like to talk to more stakeholders,” he added.

Mr. Angara’s caution on the bill’s passage adds to the noncommittal nature of other legislators ahead of next year’s elections, where candidates are apparently anxious not to be seen adding to the public’s tax burden.

The TRABAHO bill mainly seeks to reduce the corporate income tax rate from 30% currently to 20% by 2029 while making perpetual incentives such as the GIE more time-bound and performance-based.

Business groups have claimed that the removal of incentives will cost thousands of jobs if companies enjoying perks suddenly become unviable.

The Senate is awaiting a joint report from the Department of Labor and Employment and other government agencies that will provide a picture of the possible job losses arising from the TRABAHO bill.