THE HOUSE COMMITTEE on ways and means will start to discuss with the Department of Finance (DoF) the second tax reform package on Wednesday before the proposed bill formally enters the legislative process.
Committee chairman Rep. Dakila Carlo E. Cua (Quirino) said that he has yet to read the proposal that was submitted by the Department of Finance on Jan. 15.
“DoF is scheduling a briefing on Wednesday. We hope to learn more about the package. I heard it’s in the House already, but I haven’t seen it physically,” Mr. Cua told reporters at the Annual Reception for the Banking Community at the Bangko Sentral ng Pilipinas on Friday evening.
Asked when he expects to file the bill and start committee-level discussions, he said: “very soon.”
He added, he “can’t put a target yet” on having the measure approved at committee level. “I hope to get more insight after the briefing scheduled this Wednesday. It’s premature at this point.”
“It’s going to be a different challenge, not easier or harder, it will be a different challenge. It’s different by nature,” he added.
According to the Constitution, all tax measures must originate from the House of Representatives.
The measure seeks to lower the corporate income tax (CIT) rate to 25% from 30% currently, while at the same time withdrawing some tax holidays.
Finance Undersecretary Karl Kendrick T. Chua messaged reporters that the DoF need to wait for House sponsors to file a bill before it can release copies to the media.
Finance Secretary Carlos G. Dominguez III told reporters in an interview that the bill will seek to be revenue-neutral.
“Our plan always is always to have two sides of the coin, one revenue raising, one revenue reduction. We will balance it. Our approach is always balanced,” Mr. Dominguez said.
Asked whether companies will need to meet certain conditions to avail of lower corporate income taxes, he said: “I don’t think so. I think it focuses the issue on what they really want — lower income tax, or incentives that are targeted time-bound and measured? So it focuses the mind.”
“So if you are a company, you would really balance that out. Do I really need this incentive or am I better off with lower income tax? So always a balanced approach, giving them a choice,” he added.
“How can you justify incentives that are in place for 40 years? You need to graduate to become a normal company. I think in the past [there was] neglect in measuring whether or not it works, and that’s why we want to thank the previous admin for passing the TIMTA law,” Mr. Dominguez said referring to the Tax Incentives Management and Transparency Act, or Republic Act No. 10708.
In a statement over the weekend, Mr. Chua said that the tax system is “unfair,” as small companies pay the top rate of 30% while some large corporations enjoy a lower rate and a number of tax holidays.
“It has created a very unfair system wherein those paying the regular rate pay 30% of their net taxable income. But, those receiving the holidays and the special rates only pay one-third of that at around 6 to 13% in effective tax rate,” Mr. Chua said.
“The present fiscal incentives system has been suffering from policy overload such that there is now a proliferation of incentives laws granting tax and duty exemption privileges,” he added.
Mr. Chua said that there are about 14 investment promotion agencies (IPAs) granting business incentives that “do not complement each other.”
In 2015, a total of P104.40 billion worth of tax perks were issued, according to the DoF.
Among the 14 agencies, the Philippine Economic Zone Authority accounted for P66 billion worth of income and customs duty tax perks given in 2015, followed by the Board of Investments with P29 billion. The 12 other agencies meanwhile accounted for P9.4 billion worth of incentives.
The bulk of the incentives go to electronics manufacturing companies, followed by business process outsourcing services firms, and logistics, the DoF said. — Elijah Joseph C. Tubayan
