Gov’t lost 3301 billion from tax incentives – DOF

The government gave away about 3301 billion in revenues in 2015 alone as a result of tax incentives and other perks granted to only 2,844 firms, the Department of Finance (DOF) said.

In contrast, 800,000 other businesses, consisting mostly of micro, small and medium enterprises (MSMEs) pay the corporate income tax (CIT) rate of 30 percent, which remain the highest among the Association of Southeast Asian Nations (ASEAN) economies.

Finance Undersecretary Karl Kendrick T. Chua that this amount of tax subsidies represent the generous incentives granted by 14 investment promotion agencies alone and do not account for the tax incentives under other investment and noninvestment laws as mandated by some 300 special laws.

These laws that are outside the national tax code comprise 123 statutes that give out investment incentives and 192 others that provide non-investment incentives to registered enterprises and various sectors.

MSMEs employ around 63 percent of the country’s workforce.

According to Department of Trade and Industry (DTI) estimates, MSMEs account for 25 percent of the country’s total revenue from exports with 60 percent of exporters belonging to the MSME category.

MSMEs are able to contribute in exports through subcontracting arrangement with large firms, or as suppliers to exporting companies.

Chua said the current inequitable corporate tax system places MSMEs at a disadvantage as they have to compete with bigger firms that, ironically, enjoy various tax holidays and other benefits when they can easily afford to pay the correct amount of taxes.

“A cost-benefit analysis done by the DOF using available data show that many incentives enjoyed by enterprises registered in IPAs are unnecessary as the country is losing than getting back more in terms of economic benefits such as jobs, exports and productivity,” Chua said.