FINEX warns tax reform uncertainty disrupting investment plans

By Victor V. Saulon, Sub-editor
MORE policy certainty, particularly regarding the government’s system of taxation and incentives, is required in order not to disrupt businesses planning to expand their activities, the top official of the Financial Executives Institute of the Philippines (Finex) said.
In an interview, Finex President Ma. Victoria C. Españo said members of the association and financial executives in general still have unanswered questions about how the Tax Reform for Attracting Better and High-Quality Opportunities, or TRABAHO bill, will have an impact on how companies are taxed.
“From a business perspective, we do see that businesses would like to have certainty in the way their businesses would be taxed, the regulatory environment. That’s number one. We always hear many times, ‘We’re okay with paying taxes as long as it’s clear what that will be, and it’s certain’,” she said.
Ms. Españo made the statement in response to questions on the sidelines of the Finex annual conference in Taguig City. The organization of financial executives, which count as members some of the country’s chief financial officers, is celebrating its 50th anniversary this year.
“This uncertainty is creating some concerns. We hear some clients saying that some of the projects that are supposed to be done this year, the expansion projects, have been put on hold because they’re not sure what’s going to happen. So it does affect the business we’re in,” she added.
She said Finex members agree that the grant of and entitlement to incentives should not be perpetual, but the government should be clear in identifying what perks should be given, for how long and what the phase-out process or procedure would be.
“The most significant (is) the rationalization of incentives given to certain companies. So definitely, the analysis so far is if those incentives are removed then we may have some BPOs (business process outsourcing), shared services, multinational companies leaving the Philippines,” she said.
“If that indeed happens then we will have people, not just in financial sector, losing their jobs,” she said.
She said the government needs to study whether it should remove incentives to sectors that produce jobs like the BPOs.
“If you look at the Philippines, the number one concern would be poverty. If you remove those jobs, will the workers need to go overseas again?” she said.
“If you look at the BPOs, their contribution is not taxes, but jobs,” she added.
She said tax reform had been adding to the uncertainty already being created by the political environment, including the the proposal to shift to a federal system of government.
She added the government should take a second look at the Tax Reform for Acceleration and Inclusion (TRAIN) law — the tax reform law’s first tranche, evaluating whether it has been faithful to its objective.
“Somebody has to analyze [TRAIN],” she said. “If you look at TRAIN 1, there are a number of provisions there that were intended to simplify compliance,” she said, citing for example the submission of tax documents on a quarterly basis from the previous monthly basis.
But she added that the Bureau of Internal Revenue (BIR) has advised that submissions should remain on a monthly basis, and prefers tax payments at monthly intervals to protect the government’s cash flow.
“It’s as if the objective of the law was not implemented. If you talk to tax professionals they would say there are things there that are not clear,” she said, adding that the government should revisit the “spirit of the law.”
On the annual conference, she said this year’s focus is on transformation, and transforming oneself for the future.
“In the past, we used to just talk about transformation as if it’s an idea. We talk about drivers of change as if it’s something that affect others but not me. This year, most of the events that we have, including this one, is really focusing on the actual things that are happening, what the companies are doing to embrace innovation, what the companies are doing to adopt artificial intelligence, what the schools are doing so they can teach the current pool of students to be ready for the future,” Ms. Españo said.
“We hope with those concrete examples, our members could see that it is happening — I must look at my organization and start to plan,” she added.