THE CHAIRMAN of the Senate’s economic affairs committee said he is open to retaining the 5% gross income earned (GIE) tax incentive as a means of maintaining competitiveness as legislators work on the latest tax reform law, known as TRABAHO (Tax Reform for Attracting Better and High-quality Opportunities).
Asked if he was open to a recommendation by business groups to retain the incentive, which is enjoyed by economic zone locators registered with the Philippine Economic Zone Authority, Senator Sherwin T. Gatchalian said: “It’s a consideration.”
He added that the Senate has asked the Department of Finance to submit a report on the cost structure of industries to assess the pros and cons of the incentive.
“We have to look at the cost structures of the different sectors and determine whether 5% GIE applies to all sectors. I think that’s one of the things we’ll be looking at,” he added, during the sidelines of the Seventh Arangkada Philippines Anniversary Forum held in Pasay City.
On the proposal to make incentives time-bound, he cited the need to rationalize perpetual incentives.
“We’re the only country in the world that gives perpetual incentives. That should be looked at. When you give incentives, you lose revenue… that should be rationalized,” Mr. Gatchalian said.
The Senate is due to begin committee level-work on the second phase of tax reform next week, after the House of Representatives approved its own measure on Monday.
House Bill No. 8083 gradually reduces the corporate income tax (CIT) rate to 20% from the current 30% by two percentage points every other year starting 2021.
The Senate version cuts the CIT rate to 25% in the first year of implementation. — Janina C. Lim