SENATE Majority Leader Juan Miguel F. Zubiri on Wednesday said he will push for the inclusion of five or 10-year sunset provisions for fiscal incentives under the Senate version of the second package of the tax reform program.
“Let’s rationalize that but let’s give them a sunset provision. It could be five years for certain industries, could be 10 years for bigger industries. But definitely not immediate. We will not allow the immediate removal of incentives,” he told reporters.
“If it reaches here and there’s an eventual agreement with our colleagues, we will push for a sunset provision,” he added.
The second package of the Tax Reform Acceleration and Inclusion (TRAIN) program seeks to gradually cut corporate income tax rates to 25% from 30%, subject to a streamlining of tax holidays granted by 14 investment promotion agencies.
The House version of TRAIN 2 provides sunset provisions for incentives granted to registered enterprises of two to five years, depending on the time these businesses have been benefiting from such perks, according to the Department of Finance (DoF).
Mr. Zubiri said business groups told him in recent meetings that they were asking for “leeway for a sunset provision” in TRAIN 2.
“I had several meetings in the last three days with chambers of commerce and they’re asking for that leeway for a sunset provision. If it’s immediate, they are scared. Definitely if it’s immediate you will have no new expansion and you will have no new entrance of foreign direct investment,” he said.
Sought for comment, Finance Undersecretary Karl Kendrick T. Chua clarified that the adoption of a new incentives regime will not be immediate with the enactment of TRAIN 2.
“It’s not true that the (incentives) will suddenly be removed with the enactment of tax reform package 2. There is a two to five transition period. After the transition period, businesses can apply for new incentives so long as they create jobs, they export, and meet performance targets,” he told reporters in Filipino after his meeting with Senate Presidente Vicente C. Sotto III in the Senate.
He was also open with the proposal of Mr. Zubiri’s five or 10-year sunset provision on tax holidays but he prefers proposals backed by data-driven studies.
“It’s feasible. We’re open to the proposal. What we want is for it to be data-driven. Let’s see how many years are needed to help, to adjust. But in our initial studies, two to five years is sufficient,” he said.
He also responded to fears of industries leaving the country if incentives are lost, saying there were bigger reasons for the lack of investor interest in the Philippines.
“There are bigger reasons because there is port congestion, corruption, infrastructure gaps. That is what the investors said in a World Economic Forum survey when asked why they were not investing in the Philippines,” he said.
“We should fix the root cause of the problem. Let’s not use the incentives as a band-aid solution,” he added.
Sen. Juan Edgardo M. Angara, chairman of the Senate committee on ways and means, said the Senate may modify TRAIN 2 in ways that encourage more employment, instead of the possible job losses feared by Mr. Zubiri.
“Of course that is a consideration. We don’t want jobs to be lost. So we need to look at the bigger picture. Maybe we can provide reforms in way that will add more jobs. The reputation of the Philippines will improve. That is the ideal outcome,” he told reporters.
He said he will not be a co-sponsor nor an author of the bill.
“I think that as chairman, it’s better that I’m a neutral arbiter,” he said.
Mr. Sotto earlier said he intended to file TRAIN 2 in the Senate after learning from the DoF that the proposed measure will benefit small and medium enterprises. He has yet to file the bill as of this reporting.
“I’m just finalizing an acceptable version,” he said in a text message for reporters on Wednesday. — Camille A. Aguinaldo