MANILA—Officials pushing a bill seeking to bring down corporate income taxes and rationalize fiscal incentives played down concerns that the measure will force foreign investors out of the Philippines and lead to job losses.
The TRABAHO, or Tax Reform for Attracting Better and Higher-quality Opportunities, Bill seeks to bring down the corporate income tax to 20 percent from 30 percent currently, while broadening the tax base by removing some fiscal incentives.
Several business groups are opposing the TRABAHO Bill saying removing incentives will make the country less attractive to foreign investors.
Some have warned that taking away tax perks will make foreign companies relocate their operations to other Southeast Asian countries.
But Finance Undersecretary Karl Chua said measures to cut red tape, as well as new infrastructure, will make up for the removal of some fiscal incentives.
"Unlike 20 years ago when we had to give incentives, wala po tayong (we didn't have) infrastructure, ease of doing business, universal health care and all the reforms we are putting," Chua said during a Palace briefing on tax reforms
Camarines Sur Rep. LRay Villafuerte, one of the sponsors of the TRABAHO Bill, also said fiscal incentives are just one of the factors foreigners consider before investing in a country.
Peace and order, infrastructure and ease of doing business also rank high among investors' considerations, Villafuerte said.
"Ang nakakalungkot, despite the fact na ang incentives natin ay napakatagal, unlimited at mataas, ang investment natin compared to our ASEAN neighbors napakababa," Villafuerte said.
(The sad thing is, despite the fact that our incentives have a long shelf life, are unlimited and high, our investments compared to our ASEAN neighbors are very low.)
Chua also said it was not true that the government was removing all fiscal incentives.
Some incentives will be retained, but firms need to show that they qualify for these privileges by creating jobs, training their people, investing in research and development, and buying local supplies, Chua said.
"Malaki po ang epekto nito sa job creation and building the local supply chain," Chua added.
(This has a big impact on job creation and building the local supply chain.)
He also said that the Philippines is the only country that gives out unlimited incentives to investors.
In place of the current system, the Finance Department seeks to have incentives that are "performance-based, time-bound, targeted and transparent", Chua said.
At present, companies with incentives pay only between 6 to 13 percent tax on their income, while all other companies pay the full 30 percent.
He said that in 2017, the government gave away P441 billion in tax incentives to 3,139 firms.
Chua said this was unfair to other companies, especially medium, small and micro enterprises that paid the full corporate tax.