THE DEPARTMENT of Finance (DoF) said there is “no basis” for claims that the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill will result in job losses.
“Some industry players claim that the TRABAHO bill will result in hundreds of thousands of job losses. These statements are meant to sway public opinion against the reform, but do not have sound basis,” Finance Secretary Carlos G. Dominguez III said in a statement over the weekend.
The DoF also quoted Labor Secretary Silvestre H. Bello as saying that the reform measure will actually boost employment, especially outside Metro Manila.
“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,” Mr. Bello said.
The DoF previously estimated that the bill would generate about 1.4 million jobs in 10 years.
The Philippine Ecozones Association and Confederation of Wearables Exporters of the Philippines, among other group of firms, have said that the TRABAHO bill will force them to lay off workers to deal with their loss of incentives.
The Philippine Economic Zone Authority (PEZA) has likewise warned of potential job losses and that their locators could pull out of the country, as export-oriented firms factor in expected tax savings in their decisions about where to locate operations. The DoF has argued that the adaptability of the Philippine work force is an incentive to stay.
The TRABAHO bill was approved by the House of Representatives in final reading in September, while it remains at the Senate ways and means committee, which has conducted only one hearing so far to deliberate the measure.
The committee’s chairperson, Senator Juan Edgardo M. Angara, has said that the panel will focus on reviewing the bill’s job impact before going forward with the legislative process.
The TRABAHO bill was also not part of the Senate’s priority bills to be tackled before the close of the 17th Congress in mid-2019. President Rodrigo R. Duterte in his previous State of the Nation Address said that he wanted the bill to be out of Congress before year’s end.
The bill, the second tax reform package after the Tax Reform for Acceleration and Inclusion (TRAIN) law, seeks to cut the corporate income tax rate gradually to 20% by 2029 via a two-percentage-point reductions every other year starting 2021.
Fiscal incentives will be limited to industries identified in the Strategic Investments Priority Plan (SIPP) and will make them subject to performance benchmarks. Incentives will be harmonized into a single menu, including: a three-year income tax holiday, after which, a special net income tax rate of 17% will be charged starting 2021; deductions for labor, research and development, training, and infrastructure development expenses; and some customs duty exemptions for up to five years. Following this, companies will be taxed at the prevailing corporate tax scheme.
Currently, income tax holidays can be as long as nine years, with locators enjoying a 5% tax on gross income earned in lieu of all other taxes in perpetuity.
“The reality is that the current incentives regime protects the interests of a select few highly profitable and large enterprises to preserve the special treatment they have been enjoying for decades without limits. The current system of granting incentives breeds unfairness and lack of accountability,” Mr. Dominguez said in the statement.
“Package 2 is a positive impact on the economy that will make smaller firms more competitive and will allow them to expand faster,” he added.
The DoF said that 90,000 active small and medium enterprises (SMEs) and more than a hundred thousand micro enterprises pay the regular 30% corporate income tax rate, which is the highest in the region, while the top 1,000 corporations enjoy fiscal incentives.
Mr. Bello added that the Department of Labor and Employment is still ready to assist workers transitioning between jobs through several labor market programs such as labor market information services, referral and placement services, and employment guidance and counseling services.
“With the proposed appropriated funds under Package 2, the DoLE can expand these programs to extend assistance and interventions that will further enhance employability and competitiveness through skills upgrading of those who will be transitioning between jobs,” Mr. Bello said. — Elijah Joseph C. Tubayan

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