(Eagle News) – The second package of the Tax Reform for Acceleration and Inclusion (TRAIN) will lower the corporate income tax paid by some 95 percent of businesses, and retain and provide new fiscal incentives for deserving recipients.
Finance Assistant Secretary Paola Alvarez announced this as she clarified that the fiscal incentives under Package 2 of TRAIN will be given to those who contributed to national development and helped generate pro-poor investments and jobs.
Under this proposal, “the government will give support to pro-poor and sometimes riskier investments for a reasonable amount of time, after which support can be directed to new players or those who wish to expand their contributions to job generation, innovation, and countryside development,” she said.
“Those who create good jobs, bring development to poorer areas of the country, and invest in research and development have nothing to fear, but the spread of misinformation and false claims have led to confusion,” said Alvarez in a Department of Finance (DOF) release.
“These good corporate citizens certainly deserve performance-based and targeted incentives, as a reward for taking risks that others don’t for the good of the country.”
Package 2 also seeks to lower corporate income tax for more than 95 percent of businesses in the country, mostly small and medium enterprises, she said.
At 30 percent, the Philippines has the highest corporate tax rate among its Association of Southeast East Asian (ASEAN) neighbors and other competitors, which boast a much lower tax rate of around 20 percent to 25 percent.
Alvarez said Package 2 seeks to gradually reduce the Philippine rate to 25 percent, “but contingent on the modernization of the fiscal incentives regime toward one that rewards those who truly deserve it.”
This package includes provisions for a reasonable sunset period and new incentives for current players that expand their businesses or adopt new technology, she said.
“At present, there are more than 100 special laws that result in an overly complex corporate tax system, impose a large administrative burden for the government and taxpayers, and give special treatment to a small minority of corporations that pays 6 percent to 13 percent, in contrast with the 30 percent tax rate the vast majority has to cover, Alvarez explained.
In Package 2, the DOF proposes to correct this inequity in the corporate tax system by expanding what the Aquino Administration started with the Tax Incentives Management and Transparency Act (TIMTA). DOF said this provides mechanisms for transparency allowing for targeting of incentives to deserving businesses.
“This is important for the country’s overall poverty reduction efforts because every peso granted as an incentive to one firm is a peso less for funding critical infrastructure, healthcare, and education programs,” Alvarez said.
“It is both fair and prudent, therefore, to ensure that this peso, given as an incentive, comes back to society in the form of jobs, investments in research and development, country-side development, and innovation, among others.”
Alvarez said “companies that do not make or plan to expand these types of contributions to national development, but currently enjoy fiscal incentives, will need to pay their fair share at the regular corporate income tax rate after a sunset period that the Congress will determine.”
“It is high time that they help the government after being helped by the government for decades,” she added. (with a DOF release)
