The Department of Finance (DOF) remains optimistic that lawmakers will consider the long-term benefits of the Duterte administration’s comprehensive tax reform program (CTRP) by giving their stamp of approval to its remaining packages ahead of the election season.
Finance Secretary Carlos Dominguez III said the current tax setup needs to undergo sweeping reforms, particularly the system on corporate income taxation (CIT) to ensure the economy would be able to haul in more foreign direct investments (FDIs), create a lot more jobs and provide equal opportunities to over 90,000 small and medium enterprises (SMEs) in the country.
On top of lowering the CIT rate of 30 percent–the region’s highest–to more closely reflect the average in the Association of Southeast Asian Nations (ASEAN), the currently “convoluted” regime of fiscal incentives should also be overhauled, Dominguez said.
He said it is thus necessary to do away with the unfair system that lets a select group of companies, many of them on the list of Top 1,000 corporations, receive tax discounts and other incentives that they clearly no longer need, as reflected in their high profit margins, while some 90,000 SMEs struggle to pay the regular rate of 30 percent.
“Our legislators are currently studying the succeeding packages of the tax reform program. Although they labor under the usual noise that accompanies each electoral season, we are hopeful they will consider the long-term benefits to the country of completing this reform program at the soonest possible time,” Dominguez said during the General Membership Meeting of the Philippine Hotel Owners Association (PHOA) held at the New World Hotel in Makati City.
He said the incentives given without coordination by the agencies authorized to grant them through 136 laws on investment incentives and 200 others on non-investment incentives has led to a system in which tax perks have been given perpetually or without reference to any beneficial social impact, such as target job creation.
“These incentives are not always transparent and have created disparities between similar businesses,” Dominguez noted.
Citing data from the Securities and Exchange Commission (SEC) and those reported by investment promotion agencies–as mandated under the Tax Incentives Management and Transparency Act (TIMTA)–Dominguez said that for 2015 alone, the government gave away P86.3 billion-worth of income tax incentives to firms that paid out a total of P141.8 billion combined in dividends to their respective shareholders.
These declared dividends were 164 percent of the income tax incentives received by firms from various sectors.
He said such data clearly show that many of the enterprises given incentives are inherently profitable and no longer need such perks for their businesses to prosper here in the Philippines.
In the hotel industry alone, Dominguez said some 60 hotels and amusement centers were recently granted tax incentives but around half of them are located in Metro Manila and major urban centers.
