Cor­po­rate tax re­form to cre­ate 1.4-M jobs in 10 years

Sun.Star Cagayan de Oro - - Business -

MANILA -- The Duterte ad­min­is­tra­tion’s tax re­form pack­age that aims to lower the cor­po­rate in­come tax (CIT) and over­haul the coun­try’s “con­vo­luted” fis­cal in­cen­tives sys­tem is pro­jected to gen­er­ate some 1.4 mil­lion jobs, mostly in small and medium en­ter­prises (SMEs), over the next decade and cre­ate a busi­ness en­vi­ron­ment con­ducive to in­clu­sive growth, ac­cord­ing to Fi­nance Sec­re­tary Car­los Dominguez III.

Dominguez said in a state­ment Thurs­day at a busi­ness fo­rum that the pro­posed stag­gered cuts in the CIT from 30 to 20 per­cent over a 10-year pe­riod as pro­vided un­der the Tax Re­form for At­tract­ing Bet­ter and High-Qual­ity Op­por­tu­ni­ties (TRABAHO) bill will en­er­gize hun­dreds of thou­sands of SMEs and en­cour­age them to use part of their sav­ing from lower tax pay­ments to ex­pand their busi­nesses and hire more work­ers.

He called on the cap­tains of Philip­pine busi­ness gath­ered at the Wal­lace Busi­ness Fo­rum Roundtable to thor­oughly study the CIT re­form pro­posal in its en­tirety, in­clud­ing “the more con­tro­ver­sial com­po­nent” on the ra­tio­nal­iza­tion of fis­cal in­cen­tives, as he ex­pressed the hope that they would “come to the same con­clu­sion as we did: that the re­forms will be ben­e­fi­cial to our do­mes­tic econ­omy.”

“We urge the busi­ness com­mu­nity to thor­oughly read the mea­sure, rather than base their po­si­tions on hearsay and opin­ions of un­in­formed peo­ple, so that you can work with the gov­ern­ment in ex­plain­ing the true ben­e­fits of the TRABAHO bill to the pub­lic,” Dominguez said at the event or­ga­nized by busi­ness­man Peter Wal­lace held Thurs­day at the Makati Shangri-La Ho­tel.

Dominguez said that con­trary to the per­cep­tion poised by this pro­posed tax re­form’s crit­ics, the Duterte ad­min­is­tra­tion’s plan will not elim­i­nate in­cen­tives for in­vestors but would even im­prove them by of­fer­ing a bet­ter set of perks that in­cludes the fol­low­ing: 50 per­cent de­duc­tion on in­cre­men­tal la­bor costs; 100 per­cent de­duc­tion on train­ing, re­search and de­vel­op­ment; and 50 per­cent de­duc­tion on pur­chases of lo­cal raw ma­te­ri­als.

The set of in­cen­tives un­der Pack­age 2 will be trans­par­ent, time-bound, tar­geted and per­for­mance-based, Dominguez said, to, among oth­ers, help elim­i­nate cor­rup­tion and crony­ism, and “spare Filipino tax­pay­ers from sub­si­diz­ing the prof­its earned by a select group of cor­po­ra­tions en­joy­ing re­dun­dant in­cen­tives in a con­vo­luted sys­tem.”

The pro­posed CIT cuts and re­forms in the fis­cal in­cen­tives sys­tem con­sti­tute Pack­age 2 of the Duterte ad­min­is­tra­tion’s com­pre­hen­sive tax re­form pro­gram (CTRP).

The Pack­age 2 ver­sion of the House of Representatives -- the TRABAHO bill-- was ap­proved by the cham­ber last Septem­ber, while the coun­ter­part ver­sion of the Se­nate -- SB 1906 or the Cor­po­rate In­come Tax and In­cen­tives Re­form Act au­thored by Se­nate Pres­i­dent Vi­cente Sotto III -- is still be­ing stud­ied by the cham­ber’s ways and means com­mit­tee.

He noted that the re­forms be­ing im­ple­mented so far by the Duterte ad­min­is­tra­tion on its end, in­clud­ing improvements in the ease of do­ing busi­ness, have helped raise net

for­eign di­rect in­vest­ment (FDI) in­flows by a hefty third or 31 per­cent to USD7.4 bil­lion in the first 8 months of the year from USD5.7 bil­lion dur­ing the same pe­riod last year.

Apart from point­ing to deep­en­ing in­vestor con­fi­dence in the Duterte ad­min­is­tra­tion, Dominguez said the FDI surge this year proves that in­vestors are not be­ing spooked by tax re­form, as claimed by cer­tain groups.

While FDIs are dra­mat­i­cally in­creas­ing, the Philip­pine Eco­nomic Zone Au­thor­ity (PEZA) has claimed a slow­down in in­vest­ments in ar­eas un­der its ju­ris­dic­tion, which, Dominguez said, “can only mean they are try­ing to at­tract in­vest­ments that can­not be vi­able with­out un­rea­son­able in­cen­tives.”

“These are not the in­vest­ments we need to be­come a strong econ­omy. The more mean­ing­ful in­vest­ments are be­ing made by com­pet­i­tive com­pa­nies that do not ask for tax hol­i­days and other in­cen­tives,” he said.

“Those who op­pose the re­form of the in­cen­tives pro­gram are ar­gu­ing against the facts,” he added. “All over the world, fis­cal in­cen­tives are less im­por­tant in in­vestor de­ci­sions than ef­fi­cient in­fra­struc­ture and a bet­ter-ed­u­cated and health­ier peo­ple. We can­not fully ad­dress these more ben­e­fi­cial con­cerns if we let bu­reau­crats give away revenue for pri­vate profit. We need to be fis­cally re­spon­si­ble on this mat­ter.” (DOF PR)

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