The Department of Labor and Employment supports the proposed reforms in corporate taxation and fiscal incentives under the second package of the Duterte administration’s comprehensive tax reform program (CTRP), as this will sharpen the competitiveness of small and medium-sized businesses and will create more jobs, especially in the countryside.
DOLE Secretary Silvestre Bello III has also pointed out that removing unnecessary incentives now enjoyed by a few favored corporations will not lead to massive job losses, contrary to claims. These are excessive perks and the few firms currently enjoying them will remain profitable.
“As a result of the significant reduction in the corporate income tax (CIT) rate that will free up more capital for firms to invest and, in turn, create jobs, the DOLE expects this tax reform to spur employment opportunities especially in the countryside,” Bello said. “Package 2 is a positive impact on the economy that will make smaller firms more competitive and will allow them to expand faster.”
Some 90,000 active small and medium enterprises (SMEs) and more than a hundred thousand micro enterprises that pay the regular corporate income tax (CIT) rate of 30 percent, which is the highest in the region, stand to benefit from Package 2, the Department of Finance (DOF) said, as it welcomed the DOLE’s support for this job-generating tax reform proposal.
The DOF is pushing the congressional approval of a measure rationalizing incentives for corporations because under the now-convoluted system, a select group of mostly big firms enjoy tax breaks plus other perks that let them pay discounted rates of between 6 and 13 percent, while the rest pay the regular CIT.
Finance Secretary Carlos Dominguez III said “the Duterte administration wants to level the playing field for SMEs under the current corporate tax system in which more than 300 laws enable a favored group of large enterprises—many of them on the list of the country’s Top 1,000 corporations—to pay the discounted rate.”
These corporations enjoying tax holidays and other incentives are registered with any of the country’s 14 investment promotion agencies (IPAs). Most other countries only have one IPA under their respective finance ministries governing tax incentives.
The House of Representatives has approved its version of Package 2, dubbed the Tax Reform for Attracting Better and High-Quality Opportunities Act (TRABAHO) last September. The Senate is still discussing in its ways and means committee its version filed by Senate President Vicente Sotto III and called the Corporate Income Tax and Incentives Reform Act. (DOF)
