By Camille Aguinaldo, September 24 2018; Business World
Image Credit to BWorldOnline
THE SENATE on Tuesday will hold its first public hearing on the second tax reform package, with senators expected to scrutinize the rationalization of fiscal incentives provisions and its possible effects on jobs and prices.
Senator Juan Edgardo M. Angara, chairman of the Senate Ways and Means committee, said the panel will try to strike a balance between streamlining fiscal incentives, which the Finance department has blamed for billions of pesos in foregone revenues yearly, and keeping the Philippines’ investment lure and jobs intact.
“That would be an ideal outcome. I can tell you if it’s doable after a few hearings, perhaps when we hear out all the stakeholders,” Mr. Angara said in a mobile phone message to BusinessWorld.
“The important thing is we listen to the different sectors because many say that jobs may be lost if we remove the incentives on foreign direct investments and exporters, so we will really have to study that,” he said in a radio interview, speaking in Filipino.
“At a time when the country’s economic growth has slightly slowed down, we should be careful on what we will do because we might send a wrong signal to the investment community.”
The committee will tackle Senate Bill No. 1906, or the proposed Corporate Income Tax and Incentives Reform Act authored by Senate President Vicente C. Sotto III, as well as separate bills cutting the corporate income tax (CIT) rate and rationalizing fiscal incentives, proposed amendments to the Tax Incentives Management and Transparency Act and other tax administration reforms.
The House of Representatives approved its version — House Bill No. 8083 or the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) — on third and final reading on Sept. 10.
Senate Bill No. 1906 cuts the CIT rate to 25% from 30% in the first year of the implementation. That compares to HB 8083 which gradually reduces CIT rate to 20% by two percentage points every other year starting 2021.
It also seeks to repeal special laws on fiscal incentives and consolidate all such perks in a single measure.
“We all know how important investments are because the country still faces problems on job losses and the quality of jobs. That is really the biggest concern of my committee in the hearing,” Mr Angara said.
The senator said he will also take a look at the provisions that remove the preferential income tax rate for proprietary education institutions and hospitals and incentives of imported books or raw materials to be used in book publishing under Republic Act No. 8047, or the Book Publishing Industry Development Act.
“We will not allow that because it runs counter to our law on free college education and our advocacy to make education accessible,” Mr. Angara explained.
“Anything that will contribute to higher inflation rate, maybe we should set those aside.”
The first of up to five planned tax reform packages — Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) that came into force as this year began — cut personal income tax rates in hopes of spurring household consumption that drives nearly 70% of gross domestic product and either increased or added taxes on a host of goods and services.
Critics have blamed that tax reform for headline inflation rates that have pierced the central bank’s 2-4% full-year target for 2018 for six straight months till August, so far, which saw a multi-year-high 6.4% that fueled the year-to-date pace to 4.8%.