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WesMinCom says Islamic scholars helping in rehabilitation program for Abu Sayyaf returnees

WESTERN MINDANAO Command (WesMinCom) chief Lt. Gen. Carlito G. Galver, Jr has called on the remaining members of the Abu Sayyaf Group (ASG) operating in the hinterlands of Sulu to lay down their firearms following the surrender of several of their companions over the weekend. “We would like to reiterate our call for the remaining ASG members, especially those from Sulu province, to surrender the soonest,” Mr. Galvez said in a statement. On Sunday five members of the ASG, three from Sulu and two from Tawi-Tawi, surrendered to soldiers of Joint Task Force Sulu and turned over their firearms. Three of the five were identified as Kadra Arajun Sawadjaan, Alnajar Arajun Sawadjaan, and Sherul Arad Sahiyul. Mr. Galvez said “the government, in coordination with the Ulama, has prepared rehabilitation programs to those who have surrendered and will surrender to ensure that they do not go back to their ill beliefs and practices.” WesMinCom data shows 164 ASG members have surrendered since January 2017. Of the total, 72 were from Basilan, 57 from Sulu, 33 from Tawi-Tawi, and two from Zamboanga City. — Albert F. Arcilla

Challenged on all fronts, Britain’s May faces pressure over Brexit law

LONDON — British Prime Minister Theresa May came under further pressure over her Brexit blueprint on Monday, with members of the upper house of parliament saying there were “fundamental flaws” in a law crucial to the departure.

The law has also deepened splits in her Conservative Party, which has for years been divided over Britain’s relations with the European Union (EU). It is yet another battle for a weakened prime minister whose leadership is being questioned after scandals within her party, gaffes and an ill-judged election that lost her party its majority in parliament.

Facing calls to axe her finance minister, who favors a gentle Brexit, and criticism over a lack of big ideas to revive the fortunes of the Conservatives, Ms. May needs to drive through legislation to sever ties with the EU before March next year.

The largely pro-EU House of Lords, which will start debating the European Union (Withdrawal) Bill on Tuesday, have made no secret of their opposition to the legislation which they say amounts to little more than a power grab by the government.

It is designed to put current EU legislation into British law essentially in one move, allowing for changes later.

“We acknowledge the scale, challenge and unprecedented nature of the task of converting existing EU law into UK law, but as it stands this bill is constitutionally unacceptable,” said Ann Taylor, head of the influential Constitution Committee.

“The bill grants ministers overly-broad powers to do whatever they think is ‘appropriate’ to correct ‘deficiencies’ in retained EU law,” the committee said in a report.

While many peers are opposed to the legislation, the House of Lords is not expected to veto the law after it was passed in the lower house of parliament.

But more criticism over what even some government officials say was a hastily created bill to “copy and paste” EU rules and regulations into British law by the time it leaves the bloc next year underlines the size of the task facing Ms. May.

In Brussels, EU ministers, whose unity in the negotiations has amplified the arguments in Britain, are due to formally endorse its guidelines for a transition period that will leave the relationship largely unchanged.

But even with both sides mostly in agreement over the transition period bar a few questions over citizens rights and trade agreements, Ms. May faces criticism by Brexit campaigners for bowing to EU demands and accepting the status quo.

‘GET A GRIP’
Since being appointed prime minister shortly after the “Remain” side, which she backed, lost a referendum on EU membership in June 2016, Ms. May’s style of leadership has been increasingly challenged by her party, which is losing support at a time when the opposition Labour Party is enjoying record levels of members.

Her spokesman defended the prime minister’s record, saying she had not only won an agreement with the EU to move onto the second phase of negotiations on future ties, she had also boosted housebuilding, education standards and health funding.

Brexit campaigners have aired their concerns that Ms. May is delivering a Brexit in name only, while EU supporters accuse her of putting the party’s interests above those of the country in the talks to end more than 40 years of membership in the bloc.

Talk of ousting her has grown louder in recent days, with local media reporting that more lawmakers are supporting a no-confidence motion against her.

But several lawmakers asked by Reuters say her removal is a risky strategy for the party, which is divided down the middle over Brexit. The promotion of either side’s representatives to the top post could trigger mutiny.

“There were times last year for the prime minister to step aside — immediately after the June 2017 election, or after Party Conference. That didn’t happen. Maybe the Cabinet should have asked her to go, but they didn’t,” said Nicky Morgan, education minister under May’s predecessor, David Cameron. “Even more importantly, we are now into a critical nine months for the future of the country, so the cabinet need to get a grip by acting collectively to shape Brexit and agree an ideal end-state based in reality, on what parliament will approve eventually — and then stick to it.” — Reuters

Resilient Woods

The swing wasn’t quite there. In fact, it was hardly there at all. Still, Tiger Woods was more than pleased with his third non-silly-season tournament in two and a half years, and just his first since he had spinal fusion surgery last April. And he had reason to be. After all, he not only made the cut at the challenging Farmers Insurance Open; he finished 24th out of a competitive field of 156. He didn’t quite tame Torrey Pines (or, more importantly, himself), but he battled it to at least a draw, finishing three under par and showing just as much of his resiliency as his talent.

Given the sheer amount of time Woods spent in the rough, it would be an understatement to argue that he was rusty. In equal parts due to the lack of reps and the absence of a swing coach, he showed a glaring susceptibility to the dreaded two-way miss. From the get-go, he struggled to control his mechanics: he went way, way left at first, and then, in an effort to compensate, wound up going way, way right. And it was the story until he cleared his 72nd hole; he hit a mere three of 14 fairways in the final round and 17 of 56 all told, abhorrent numbers that won’t help him any in his bid to crowd the top of the sport anew.

From the minuses come the pluses, however. Precisely because Woods was so errant off the tee, he was compelled to, in his words, “fight out the scores,” to relative success. That he relied on his trademark determination was not a surprise. That he managed to lean on a robust short game was. As he noted, his adventures “weren’t yawners. Down the middle, on the green, miss the first one, one-hand the second. These were grinds. I fought hard. It’s nice to see I’m able to still grind.” Which was why he made the cut in the first place; after a bogey on his 35th hole, he absolutely had to birdie the next in order to make the weekend. And he did.

It would be foolhardy to believe the answers to Woods’ problems with a club in his hand will be found anytime soon. Nonetheless, he’s right; there is much to feel good about. “It’s all veg positive,” he contended. Well, perhaps not all, though his capacity to make violent swings underscores just how much he has recovered from his back troubles. Up next: the Genesis Open at the Riviera Country Club in two weeks. Meanwhile, he’s bent on addressing “a bunch of things. I can feel some of the things I’m doing wrong with my swing, so we’re going to go back to work.” And armed with good health, he figures to steadily improve, no doubt a scary development for the new elite.

 

Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994. He is the Senior Vice-President and General Manager of Basic Energy Corp.

DoF officials to study Alibaba proposals for e-commerce, AI

FINANCE department officials will attend a workshop in Hangzhou, China on Wednesday, which will include a meeting with Alibaba Group founder Jack Ma to explore e-commerce and artificial intelligence (AI) applications for the Philippines.

In a statement, the Department of Finance (DoF) said that a delegation led by Finance Secretary Carlos G. Dominguez III, will be in Hangzhou between Jan. 31 and Feb. 2 to hear Alibaba proposals that are “tailored” for Philippine needs.

The meeting with Mr. Ma will take place on Feb. 1.

“We will look at the financial regulations in China and explore how we can tap digital technologies to empower our MSMEs (micro, small, and medium enterprises), especially those in the countryside, the same way that Jack Ma did to help small enterprises in China gain a foothold in the global e-commerce industry,” Mr. Dominguez said. 

The New Economy Workshop in Hangzhou will “incorporate firsthand experience with real-life e-commerce applications in an effort to provide a framework for creating a regulatory environment that encourages growth across the financial technology, logistics, e-commerce and big data industries,” the DoF said.

The topics include inclusive finance through digital technologies; rural e-commerce development; and smart logistics in the digital economy.

There will also be discussions on the use of artificial intelligence for smart traffic management — a tool to help ease congestion in Metro Manila — led by Alibaba Cloud, the cloud computing arm of the Alibaba Group.

Alibaba Business School is located next to the Alibaba head office in Hangzhou, the capital of Zhejiang Province in eastern China. It was jointly established by Hangzhou Normal University and Alibaba Group in October 2008, focused on enabling the growth of small and medium enterprises.

Among the speakers scheduled to appear at the workshop are Wu Xiaobo, an economist and former dean of the Zheijiang University School of Management; Chen Long, the chief strategy officer of the Ant Financial Group, the operator of Alipay; Bill Wang, head of the All-Countryside Business Unit and vice-president of the Alibaba Group; Min Wanli, senior director of Alibaba Cloud; Bhushan Patil, president of the India-based e-tailer Paytm; and Guan Xiaodong, head of Cainiao Network International Business.

The Bangko Sentral ng Pilipinas (BSP) launched the National Retail Payment System (NRPS) in December 2015 to create a safe, efficient and reliable electronic retail payment system.

In November, the central bank also launched the PESO Net electronic fund transfer payment scheme for individuals and large businesses, which is the first automated clearing house under the NRPS.

The BSP is also set to launch another automated clearing house called InstaPay, which will enable 24/7 low-value electronic fund transfers. The system is due to launch this year.

The China visit follows Mr. Ma’s visit to the Philippines in November, during which he offered to help develop the digital market in the Philippines to create a cashless society and connect the country’s e-commerce markets to other markets in Europe, China and other countries, with small businesses the intended beneficiaries.

Mr. Ma told Mr. Dominguez his standard for online financial transactions is known as “3-1-0,” meaning firms can apply for a loan online in three minutes, with one minute to get the money transferred to its account, with zero human contact.

Mr. Ma’s online lending schemes claim a loss rate of only $4 out of $10 million issued, against a $10-to-$100,000 ratio for loans processed with human intervention.

In February 2017, Ant Financial Services Group, an affiliate of Alibaba Group, acquired 45% of Globe Telecom, Inc.’s financial technology arm, Globe Fintech Innovations, Inc. (Mynt) — which was approved by the competition regulator in August. — Elijah Joseph C. Tubayan

Nation at a Glance — (01/30/18)

News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.

Savings-investment gap widens further in 2017

How PSEi member stocks performed — January 29, 2018

Here’s a quick glance at how PSEi stocks fared on Monday, January 29, 2018.

Wish list for tax assessment

Everyone has a wish list. The Merriam-Webster Dictionary defines “wish list” as “a list of desired but often realistically unobtainable items.” I have my own long list of wishes for my family, my friends, and my work. Topping off my list are my wishes for my one-year-old daughter: I wish for her to grow up knowing and loving God, to be healthy and be able to live a happy life, regardless of whether she wants to be a certified public accountant or a tax practitioner like me, or a chef like her father. I think she prefers the latter since she likes to play with her kitchen play set. She only likes to scribble on my copy of the Tax Code, the Tax Reform for Acceleration and Inclusion (TRAIN) Law, and draft Revenue Regulations (RRs).

And so the list goes on for my other wishes on my personal life.

As for my tax practice, I have a long wish list. For now, I want to focus on my wishes for tax assessments. Wishes that either have been addressed by the recently passed TRAIN Law and recently issued RR No. 06-2018 or wishes that I hope our lawmakers can address in the succeeding packages of the administration’s tax reform program.

Let me start with a wish already granted. Beginning in the taxable year 2013, taxpayers have been heavily burdened in cases of failure to withhold or erroneous withholding. RR No. 12-2013 promulgated that no deduction will be allowed notwithstanding that the deficiency withholding tax is paid at the time of the audit. Thus, a taxpayer, though merely helping the government in collecting taxes by being its withholding agent, pays deficiency withholding tax and income tax, together with penalties, in case of failure to properly withhold. Let us be thankful that this rule is now revoked.

Pursuant to RR No. 6-2018, deduction from gross income shall be allowed, provided that the deficiency withholding tax is paid even at the time of audit or reinvestigation. Thus, a taxpayer shall no longer be burdened with additional deficiency income tax and corresponding penalties in case of failure to withhold. The taxpayer just has to settle the deficiency withholding tax and corresponding penalties, and the expenses shall be allowed as a deduction for income tax purposes.

Another wish granted relates to the penalty interests in case of failure to pay or remit on time the taxes due.

Prior to the TRAIN Law, every taxpayer who failed to pay their taxes on time was required to pay a deficiency interest of 20% per annum. A delinquency interest of the same rate may also be assessed in case of failure to pay the assessed deficiency tax, surcharge, and deficiency interest on time. Thus, a taxpayer may be in a situation wherein a total of 40% interest will be charged from the date of demand up to the date of payment. Let us be thankful again that these rules were now changed under the TRAIN Law.

Under the TRAIN Law, the deficiency or delinquency interest is now double the legal interest rate for loans as set by the Bangko Sentral ng Pilipinas (BSP). Currently, pursuant to BSP Circular No. 799, the legal rate of interest is at 6%. This makes the penalty interest rate now lower at 12% per annum. This is good for now. However, considering that the rate is now dependent on the legal interest rate set by BSP, this makes the penalty interest rate uncertain. In case the legal interest goes up to 12%, our penalty deficiency interest can go up to 24%, much higher than the 20% which we abhor. To lessen the uncertainty, I hope that this will just be pegged to the legal interest rate only, not double. The taxpayer already pays surcharge and compromise penalties in case of failure to pay taxes on time. Thus, at the most, they should only be required to pay for the cost of money not remitted to the government on time.

On the imposition of delinquency interest, the TRAIN Law now provides that the deficiency and the delinquency interest shall not be imposed simultaneously. Thus, a delinquent taxpayer shall only be required to pay delinquency interest in case of failure to pay on time the amount assessed in the final notice of demand by the Bureau of Internal Revenue (BIR).

While the above rules will certainly ease the burden of taxpayers in case of tax assessments, other items are still pending on my list and on every taxpayer’s wish list.

In every tax assessment, it is every taxpayer’s wish that it be closed as soon as possible. This is to avoid the running of penalty interest which, in certain cases, already exceeds the amount of basic deficiency tax. Thus, I also wish that there be a maximum period when the penalty deficiency interest shall be applied. Just as in the Local Government Code provisions, a period of three years may be set. Setting a maximum period on the imposition of penalty interest protects the taxpayer in case of prolonged tax assessments. With this, a taxpayer shall also no longer be in a position where they seek to settle their supposed deficiency tax based on BIR evaluation just to avoid the running of interest.

This leads me now to my fourth and last wish for tax assessment. I wish that our Tax Code will prohibit issuance of Final Assessment Notices (FAN) with findings exactly the same as those in the Preliminary Assessment Notices (PAN), except when the taxpayer failed to reply to the PAN or failed to properly address the findings in the reply.

Our Tax Code specifically requires the issuance of a PAN prior to the issuance of FAN. However, beginning 2013, RR No. 18-2013 removed the informal conference stage and authorized the BIR to issue the FAN within 15 days from receipt of the reply to PAN. Thus, it has been the practice of the BIR to disregard the taxpayer’s reply to PAN.

We understand the good intention of the BIR to expedite the processing of tax assessments. However, this only leads to an automatic issuance of Final Assessment Notice without considering the taxpayer’s reply to the PAN. The taxpayer is stripped of its right to respond and be heard prior to the issuance of FAN. This is fine in case the assessment is rightful and not based on the misappreciation of facts. In most cases, though, tax assessments are merely based on presumptions with no verification of facts. This puts the taxpayer in a situation of having a multi-million peso and sometimes even billion peso FAN, based alone on the appreciation of facts with no further verification from the taxpayer.

Giving the taxpayer the proper venue to reply and be properly heard of its reconciliation/explanations will certainly help both the taxpayer and the government to have a more effective and efficient tax assessment system. A taxpayer shall no longer be in a situation wherein it does not have any choice but to elevate the case to the Court of Tax Appeals or, worse, just settle it legally or “compromise” at the BIR level to close the tax assessment.

There are pending items in my wish lists that may or may not be granted. Thanks to our lawmakers if these are granted. If not, then let’s just hope that it will all be for the good of the taxpayers and this country. As for my wish for my daughter, I certainly hope that God will grant it, not exactly to be a tax practitioner, but to have a happy life.

Ma. Lourdes Politado-Aclan is a senior manager of the Tax Advisory and Compliance of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.

The Big Bad Wolf Book Sale is coming

Fairy tales have taught us to never let big bad wolves in. They are the devourer of children, baby goats, and two out of three enterprising pigs.

Now the Big Bad Wolf is coming and it’s out to get us bookworms and the special fund that we have set aside for literature.

We’re talking about the Big Bad Wolf Book Sale, a Malaysian book sale that started in 2009, and has been touring other Southeast Asian countries like Indonesia and Thailand, which will be having a Manila leg next month. Starting on February 16 at 9 a.m., it will run nonstop for a whopping 231 hours until February 25 at 11:59 p.m. at the World Trade Center Metro Manila in Pasay City. Admission is free.

The Big Bad Wolf Book Sale has been dubbed as the “world’s biggest” of its kind, offering two million books at discounts ranging from 60% to 80%. There’ll be children’s lit, fiction, non‑fiction, and novels.

You can check out their Facebook page for more information.

Little pig, little pig, let me come in?-LDG

Spicy, explosive, chicken‑y world domination for Tetsuo

Close your eyes and imagine Japan.

Are what come to mind their art and culture, their martial arts and their work ethic, all created with a silent but strong sense of discipline that governs their daily lives?

Or is it the opposite: the angst of the youth that bubbles underneath all that discipline, expressed through over‑the‑top street art, colorful devil‑may‑care fashion choices, deviant lifestyles, and almost everything and anything that they can think of as they fight the seemingly inevitable fate to be a part of the blue‑ or white‑collared workforce?

If the typical Japanese resto has an aesthetic that harks to the former, then Tetsuo—the spicy chicken karaage concept that began at Ateneo de Manila’s John Gokongwei Student Enterprise Center (JSEC)—reflect the latter. Tetsuo is the rebel youth screaming at the void, the one who doesn’t want to be like the others, and the one no one expected to be as large and as well known as they are today.

But that’s where SparkUp found Tetsuo and its co‑owners Sean Bautista and Timmy Jacob, at the jam‑packed DULO bar in Makati at 7 p.m., early on during Tetsuo’s kitchen takeover event where they served their chicken karaage with rice, cold soba, or steamed buns, alongside the bar’s usual menu. Loud music blasted from the speakers and scenes from ‘80s and ‘90s Japanese pop culture were projected on the concrete walls, while bar patrons and Tetsuo’s loyal customers munched on crispy‑on‑the‑outside‑but‑juicy‑on‑the‑inside umami chicken.

Bautista and Jacob, both 23 years old, have been friends since high school. Bautista graduated from Ateneo with a degree in graphic design, Jacob graduated from the University of the Philippines with a degree in economics. They both landed jobs in market retail, Bautista with a specialized sneaker brand and Jacob with a fashion retail brand. The other members of the Tetsuo team have entrepreneurship backgrounds. None of them came from a culinary course.

In 2015, when they were both students, they entered a contest mounted at the Mercato Centrale and placed in the finals. However, schoolwork and other concerns prevented them from managing their own stall at the night market. Since they were current and former students of Ateneo de Manila, having a stall in JSEC by 2016 was within their reach. Sometimes they would have pop up booths at different events, and found that they had developed a following of Ateneo students and people from former events. They have (spoiler alert) their own restaurant establishment in the works, to be opened this year, making their food more accessible to non‑Ateneo students.

“We’ve always wanted to open outside but JSEC was within arms reach,” Jacob told SparkUp in the sidewalk outside DULO, away from the noise and the crowd but still with enough material for Bautista to occasionally pause to snap a photo with his DSLR camera. “We knew the market so we just tried it out and did a killing there.”

“It was a good test for the concept to see if it would survive,” Bautista added. “And the brand got sort of a cult following inside Ateneo. People already saw it as something more, people thought that it could be a restaurant that could work outside.”

(At this point of the interview, a guest whom they personally knew came out from the bar to report that there were no seats left. Jacob’s response: “go HAM… hard as a m‑‑‑‑‑‑‑‑!”)

Art Samantha Gonzales

“Tetsuo is a fried chicken concept where we wanted to elevate the fast food experience,” said Bautista. “We tried to infuse elements of hip‑hop culture, anime, generally things that we’re interested in, into this fast food concept, so that it’s palatable to the millennial audience. We’re kind of just friends hanging out, cooking food for each other. That’s the kind of vibe that we want to elicit.” (And it’s probably because of that friendly vibe that no violent riots were started for karaage.)

“We don’t just limit ourselves to just being sort of a Japanese restaurant even though it heavily inspires us,” Jacob continued. “So if you’ve noticed our signature karaage, which is usually served in other restaurants with mayo and togarashi, is served with gravy which is a little different. We put the different twist to our food.”

“It speaks about our brand being the amalgamation of different influences,” Bautista continued. (“I’ll send you a copy of your pictures,” he yelled at a customer driving off in her motorcycle as he waved goodbye.) “We test them out put them together to see what works and what sticks.”

Still, they were serious about their business and their brand. They weren’t satisfied with having a normal JSEC food stall. They held events. They sold graphic shirts that they themselves designed, and wore those shirts during the DULO event—Bautista’s was a black shirt with the Japanese kanji for Tetsuo in white on the lapel, while Jacob’s was a black shirt with a graphic content warning on the front and a chicken having an existentialist crisis on the back. They invited DJs to play music by their stall. “We didn’t let the stall inhibit us in our way,” Bautista said. “Even at JSEC we were kind of like changing the landscape.”

“Whenever the brand does pop‑ups outside Ateneo we would work with other groups that we feel influence our brand,” Jacob said, adding that they can be kind of picky when it comes to events. “Let’s say like there’s an event where streetwear culture is incorporated or other local brands, we still have people from Ateneo come to our events and say ‘Hey, I still remember your food. I want it. I miss the food, I want to have it again.’”

“I feel like people can relate to the brand in a sense and like the sort of image that we put out,” said Jacob.

What kind of image is that exactly? “We don’t try to think about it too hard,” said Bautista. “It’s just like a personification of us.”

“The brand is very much what we’re into but of course to make a business work you have to make your interests more relatable to the market,” explained Jacob, when asked about how they put their marketing backgrounds to good use in a food business.

“We treat these small events as marketing activations,” Bautista added. “We really make our money through physical locations like JSEC and what we’re opening in the future.” They’re also active on social media, which features their own designs, photographs, and anime screenshots of karaage.

What’s next on their quest for spicy, explosive, chicken‑y world domination? “Having our own restaurant is in the plans,” said Bautista. “We don’t want to give a specific date yet, but that’s definitely in the works, coming soon, but we feel like that’s the next step for the brand to grow and take over the world.”

Kesha rallies Grammys in fierce anti-abuse statement

New York — Pop singer Kesha delivered a powerful statement on behalf of women’s equality at the Grammys on Sunday as she led a fierce performance of “Praying,” her own account of abuse, with A-list back-up from a chorus of stars.

Her face intense and her voice building in ferocity, Kesha brought the crowd at Madison Square Garden to its feet and at times to tears at a time of growing public consciousness about sexual harassment and misconduct.

“Praying” is an autobiographical song clearly directed at Dr. Luke, the producer whom Kesha accuses of raping and psychologically tormenting her.

Even before the rise of the #MeToo movement in response to revelations about Hollywood mogul Harvey Weinstein, Kesha rattled the industry by demanding the end of her contract to work with Dr. Luke, who has denied the assault charges.

“After everything you’ve done / I can thank you for how strong I have become,” Kesha sings.

Kesha performed at the Grammys surrounded by fellow stars including Cyndi Lauper, Bebe Rexha, Camila Cabello and Andra Day, who offered symbolic and literal support.

Kesha embraced them in a bear hug as she finished.

Singer Janelle Monae, introducing Kesha, said that the music industry needed to address its own abuse problems.

“To those who would dare try and silence us, we offer you two words: Time’s Up!” she said, using a slogan for the movement launched on New Year’s Day by hundreds of prominent women in the entertainment industry.

“We say time’s up for pay inequality, discrimination or harassment of any kind, and the abuse of power,” she said.

Despite the rousing reception, Kesha was passed over for the awards. She was not nominated in major categories and came up short for the two pop prizes for which she was in the running.

Before the Grammys, Kesha tweeted that “I needed this song in a very real way” and that she was nervous to perform.

“If you need it, I hope this song finds you,” she wrote. — AFP

DoF cautious on firms’ income tax cut

By Elijah Joseph C. Tubayan
Reporter

THE DEPARTMENT of Finance (DoF) will ensure that state coffers will not suffer unduly as it seeks to give the Philippines a better chance of bagging foreign investments by cutting the corporate income tax rate to the level of many of its competitors.

Reducing the corporate income tax rate to 25% from 30% currently can be done by either cutting it automatically by a percentage point annually over the next five years, or by cutting it by the same magnitude the year after it collects an additional P26 billion — about 0.15% of gross domestic product — after removing fiscal incentives from sectors that do not need them, the department said in a statement on Sunday, quoting Finance Undersecretary Karl Kendrick T. Chua.

The second tax reform package the department submitted to the House of Representatives on Jan. 15 focuses on cutting the corporate income tax rate while covering revenues expected to be foregone by streamlining fiscal incentives. The DoF estimates that the government has been losing about P300 billion annually from superfluous tax incentives.

A national association of tax experts cautioned, however, that making the graduated cut in corporate income tax rate conditional on revenues to be collected from a wider tax base could turn off investors, hence, defeat the very purpose of that reform.

“We will propose the second method to ensure that this tax reform, which is Package Two of the CTRP, will be revenue neutral,” Mr. Chua said, referring to the comprehensive tax reform program that will consist of up to five packages.

“Every one-percent reduction requires P26 billion in counterpart revenues to keep revenue neutrality.”

The same statement quoted Finance Secretary Carlos G. Dominguez III as saying: “Our plan is to lower the tax rate for corporations from 30% to 25%. But our proposal to the Congress is to allow us to do that only if there’s a reduction in the amount that we provide for incentives.”

Sought for comment, Tax Management Association of the Philippines President Raymund S. Gallardo, however, cautioned that such a condition for cutting the corporate income tax rate as planned could defeat the purpose of this reform.

“Baka mahirapan sila sa pag-attain ng conditions. So, we want sana ‘yung straight 25%. Makakaapekto ‘yan sa foreign investments (It might be difficult to fulfill that condition, so we want an unconditional cut to 25%. That condition could affect foreign investments),” Mr. Gallardo said in a telephone interview yesterday.

“Tayo na nga ang pinakamataas (We already have the highest corporate income tax rate) so why do you have to have conditions?” he added.

“And it would be easier to implement if it would be the 25% and then look at other measures to compensate for the loss (in revenues).”

The DoF is taking this tack after the first tax reform package — submitted to both chambers of Congress in September 2016 and enacted as Republic Act No. 10963 on Dec. 19, 2017, consisting of a cut in personal income tax rate and compensating for estimated foregone revenues by either hiking or imposing consumption taxes on several items — yielded a revenue estimate of about P90 billion for the first year of implementation after provisions were toned down, from P133.8-157.2 billion originally.

Mr. Chua added that the Finance department’s proposed bill includes the repeal 150 laws granting fiscal perks to businesses and replacing them with an omnibus law covering all 14 investment promotion agencies (IPAs) in the country.

In order to improve compliance, Mr. Chua said the department is proposing simplification of tax rules for firms by, among others, cutting the number of tax forms and procedures; reviewing the National Internal Revenue Code to improve general anti-avoidance regulations and transfer pricing and costs; and reducing the optional standard deduction to 20% from 40% of gross income.

He said there should be clear measures of actual investment, job creation, countryside development, exports, as well as research and development to ensure that incentives are performance-based.

Moreover, Mr. Chua said, “[a]ll tax incentives should not be perpetual because the government cannot go on subsidizing business forever.”

“If a firm continues to be a losing firm, it has no business being in business.”

Hence, DoF has proposed that companies enjoying incentives of more than 10 years will continue to enjoy such perks for two more years once the second tax reform package is enacted.

Businesses availing of incentives for five to 10 years will continue to do so for three more years after enactment, while those with incentives for less than five years will avail of them for five more years.

In order to make sure the effect of incentives is better monitored, the DoF’s proposal also seeks to give the Finance chief the power to administer the tax perks shelled out by IPAs — which are now attached to various Executive offices including the Department of Trade and Industry (DTI), making it difficult to monitor total revenue impact — as chairman of DoF’s Fiscal Incentives Review Board (FIRB).

“The Secretary of Finance can cancel or suspend the grant of incentives upon the review and recommendation of the FIRB,” Mr. Chua said.

“So rather than creating a new body, we will just expand the existing body that is chaired by the Secretary of Finance who currently grants incentives only to government-owned and -controlled corporations.”

Past administrations had sought to address foregone revenues from tax incentives, but DoF and DTI — which has warned that cutting such perks would make the Philippines lose out to its competitors — have never agreed on a formula to do so.

Mr. Chua cited the practice in several Southeast Asian economies, as well as in Japan and South Korea, where their respective Finance ministries approve the grant of tax incentives.

The DoF has noted that the Philippines’ smaller corporate tax base has resulted in a corporate tax efficiency rate of just 12.3%, even with its high 30% corporate income tax (CIT) rate.

Thailand’s CIT rate is 20% but it collects almost three times the Philippines — a 30.5 percent efficiency rate — equivalent to 6.1% of gross domestic product (GDP); Vietnam’s CIT rate is 25% but it has a 29.2% tax efficiency rate, with collections equivalent to 7.3% of GDP; while Malaysia’s 24% CIT rate generates a 27.1% efficiency rate in terms of collecting such taxes that are equivalent to 6.5% of GDP.

Moreover, DoF’s statement quoted Mr. Chua as saying, “There is discrimination among different types of businesses that create distortion and inequity.”

“For instance, companies with same profit levels pay different tax rates because of the incentives enjoyed by some but not by others, and taxpayers with more profitability may be paying less than those with lower profits, also because of overly generous incentives.”

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