‘Package 2 not anti-incentive’
Workforce-heavy industries such as the IT-BPO sector should benefit from the measure immensely and should encourage the creation of jobs as well
The government plan to optimize the country’s corporate tax system under the Package 2 of the Comprehensive Tax Reform Program (CTRP) is not anti-incentive despite the removal of some of the perks, Finance Undersecretary Karl Kendrick Chua said.
“The fear-mongering about the removal of incentives should stop. Package 2 will actually give superior incentives for the right reasons such as the creation of good jobs, investment in research and development and expansion in the countryside,” Chua said.
“These types of activities will be able to claim additional deductions, which will reduce the companies’ tax liabilities,” he added.
He cited the additional deduction of up to 50 percent on direct labor expense under the reform, which could mean a 150 percent reduction in direct labor expense for every job created. This compares against only a 100 percent cut in the present system.
According to Chua, from this feature alone, workforce-heavy industries such as the IT-BPO sector should benefit from the measure immensely and should encourage the creation of jobs as well.
He also highlighted another superior incentive that allows companies to have as much as 200 percent additional deductions in the cost of training their workers. The catch is that firms must be able to invest in upgrading the skills of their Filipino employees, Chua said.
Also, the proposed reform aims to lower the country’s current corporate income tax from 30 percent to just 20 percent, which is the highest in the ASEAN.
“When you look at the changes we are making, it’s easy to agree with the thinking behind it. Incentives are meant to encourage positive behavior and we want to make sure our incentive system benefits firms whose activities are beneficial to the Philippines like job creation and training,” Chua said.
“We are not anti-incentives and it is not true that we are removing them altogether. We are giving superior incentives through a system where both Filipino people and firms with registered activities benefit,” he stressed.
Earlier, the Department of Finance said the Philippines gave away P1.12 trillion worth of tax incentives and exemptions to a select group of 3,150 companies from 2015 to 2017 while most small and medium scale businesses pay the regular 30 percent.