By Charissa Luci-Atienza, August 1 2018; Manila Bulletin
Image Credit to Manila Bulletin
Speaker Gloria Macapagal Arroyo assured Tuesday that the House of Representatives will prioritize the passage of the Duterte administration’s corporate tax reform package.
The first woman Speaker said she cannot give the timetable, but Package 2 of the Duterte administration’s Comprehensive Tax Reform Program (CTRP) will definitely be given due attention by the chamber under her leadership.
“I don’t want to be very explicit about the timeline, but it’s a priority,” she told reporters in an ambush interview, after attending the House Committee on Ways and Means hearing on the corporate tax reform package.
Arroyo, who was scheduled to meet the country’s economic managers for a working lunch to discuss ways on how to address inflation, also clarified that the reform measure should not be called “TRAIN (Tax Reform for Acceleration and Inclusion)2,”but a “corporate income incentives reform.”
“It’s not called TRAIN 2 because TRAIN 2 is misleading. This is going to be a corporate income incentives reform. Remember in the SONA of President Duterte, it’s there and I said in my very short statement upon assumption that the first and foremost job that I have as speaker is to carry out the legislative agenda of President Duterte,” Arroyo said.
During the House Committee on Ways and Means hearing on the reform measure, AKO Bicol party-list Rep. Rodel Bato cabe asked his colleagues to create a different title for the reform measure.
“This is not imposing taxes. Let us create a different title for this measure. This is very far from TRAIN 2. Ito ay tutulong sa ating mga kababayan,” he said.
Deputy Speaker and Batangas Rep. Raneo Abu, one of the authors of the House Bill 7458, which provides for graduated cuts in the corporate income tax rate and the modernization of investment incentives, also noted that the Package 2 of the tax reform package “is not a tax measure.”
“It is a corrective measure to address redundant incentives (57 percent) given to firms which fixed income earners are in a way subsidizing. We believe that we support infant industries but it should be time bound. We are lowering the corporate income tax which will cushion the effect of removing the incentives of those companies which for so long enjoy the incentives but no inputs to exports and labor,” he said.
He laments that the country’s corporate income tax rate is the highest in ASEAN countries.
“We are pro-investors. This rationalization is different from TRAIN 1. Forty-three percent of the total firms will continue to get incentives. These are not redundant (57 percent). We will rationalize the tax incentives by making one set of incentives. Unlike now that 14 Investment Promotion Agencies and BOI (Board of Investment) give different set of tax incentives,” Abu pointed out.
House Bill 7458 provides for a one-percentage point reduction in the current 30 percent CIT every year for domestic corporations, resident foreign corporations, and non-resident foreign corporations starting 2019, provided that the cut would not reach lower than 20 percent, while modernizing fiscal incentives to make them performance-based, targeted, time-bound, and transparent.
It also aims to formulate a three-year Strategic Investments Priority Plan (SIPP) to ensure that only industries that provide positive spillover to the economy, based on rigorous cost-benefit analysis, are given incentives.
The measure also provides that businesses under the SIPP may be granted up to three years of income tax holiday (ITH), a reduced CIT rate of 15 percent up to 5 years inclusive of the ITH, a 50 percent tax allowance for qualified capital expenditures, along with varied rates of tax deductions for research and development, training, labor expenses, infrastructure development, and reinvestment.
HB 7458 includes a Department of Finance (DOF) proposal to expand the mandate of the Fiscal Incentives Review Board (FIRB) beyond government-owned and -controlled corporations (GOCCs) to include the approval of incentives to all registered enterprises as recommended by the various IPAs and the reconstitution of this body with the Secretary of Finance as chairperson and other government departments as members, including DTI and NEDA.
The bill also contains a “sunset” or a phase-out provision for incentives granted to registered enterprises over two to five years, depending on the length of time these businesses have already benefited from such perks.
HB 7458 also includes the improvements proposed by the DOF in the reporting and monitoring requirements under the Tax Incentives Management and Transparency Act (TIMTA) to further promote accountability on the part of registered enterprises. The bill also contains provisions that aim to strengthen the enforcement powers of the Bureau of Internal Revenue (BIR), particularly on the prosecution of tax cases.
At the House Committee on Ways and Means hearing, Department of Finance Undersecretary Karl Kendrick Chua also clarified that the intention of the second tax reform package is not to shoo away investors. “Companies that create jobs have nothing to fear. We are pro-investment. The second tax reform package will not put the country at risk,” he told the members of the House Committee on Ways and Means.
He noted that the government has lost P178.56 billion in potential revenues in 2016 as a result of tax incentives given out to only 3,102 firms registered with various investment promotion agencies (IPAs), citing the data from the BIR and the Bureau of Customs (BOC).
The government had foregone P74.53 billion in revenues from income tax holidays (ITHs), P46.66 billion from special income tax rates, and P57.38 billion in customs duties, he said.