SPEAKER Gloria Macapagal-Arroyo has committed full support for early passage of the next-wave tax reforms that cut corporate-income taxes and rationalize fiscal incentives, but stressed that good infrastructure and the ease of doing business are key to attracting and keeping investors and thus should go alongside the tax perks reform.
This, as one of the country’s largest business groups also weighed in and backed the “long-overdue” measures in the second package of reforms under the Tax Reform for Acceleration and Inclusion (TRAIN), which continues to be blamed in some quarters for spawning record inflation.
After spending time engaging economic zone investors in her home region in Central Luzon, Arroyo said that, while incentives may attract investors, they cater only to so-called footloose firms, and that infrastructure and ease of doing business are the biggest factors that attract business ventures to a particular country.
In Pampanga she said investors in San Simon Industrial Park (SSIP) did not place their businesses for the fiscal incentives but because of the good infrastructure and the support of the local government through measures fostering ease of doing business.
“Investors can do without fiscal incentives,” she said. “The government realizes that there are businesses that need fiscal incentives and there are industries that invest not really because of incentives.”
The Speaker said she would still push for the passage of the Trabaho law—for “Tax Reform for Attracting Better and High-quality Opportunities,” the name coined by members of the House for the second wave of reforms —once session resumes on August 27. She also allayed fears the proposed Trabaho law may scare away investors.
“The tax reform, the rationalization of the fiscal incentives—that’s why I want to show here that it is not the most important thing. Infrastructure and the ease of doing business are the most important things, but anyway, it will begin the period of interpellation also when we resume,” she said.
Arroyo, citing the Department of Finance, said they were not losing their export-related incentives as the government recognized that some locators are footloose and, thus, need to keep these incentives under the second tax-reform package.
However, she said for most business enterprises, there is a need to implement more efficient and reasonable policies to enable the government to raise more funds for better services and infrastructure to enable people to grow and businesses to flourish in the country.
Arroyo said the lower chamber will continue to listen to stakeholders of the proposed Trabaho law. These concerns include the rate and length of tax incentives, value-added tax and VAT refunding, among others.
FFCCCII backs TRAIN 2
Also at the weekend, the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc. (FFCCCII) said it is in favor of the proposed TRAIN 2 as the contemplated reduction in corporate income-tax rates “will improve the competitiveness standing of domestic corporations, particularly in the Asean region, and allow them to reinvest the tax savings in their business.”
The “lower taxes could make businesses pass on the tax savings to consumers by way of lower prices to stay competitive,” said the group in a statement.
FFCCCII President Domingo Yap said, “We agree that rationalization of fiscal incentives reform is long overdue. The regime of incentives must be well targeted to assist the more deserving, and be time-bound rather than indefinite. They must be performance-based to ensure they are attuned to the government’s objectives in generating employment and attracting investments.”
Yap added, “We are with the consumers in expressing concern over the higher inflation being currently experienced and have urged our members to do their part by not unnecessarily raising prices.”
He found it “unfortunate that TRAIN 1 took some time to legislate and, by the time it was passed into law, coincided with a weaker peso and much-higher fuel prices.” This is why TRAIN 1 was deemed “a contributory cause to inflation, although objective analysis shows otherwise.”
Yap affirmed the group’s support for tax reform “to sustain fast and inclusive economic growth for
Meanwhile, Minority Leader Danilo E. Suarez of Quezon said the government may generate more revenues for social services if the lower chamber will prioritize the passage of proposed tax amnesty bill.
He said almost P6 billion worth of revenues for social services were collected by the government from the previous tax amnesty law.
Suarez was referring to the implementation of tax amnesty under Republic Act (RA) 9480 dated February 19, 2017, covering year 2005, which generated P5.902 billion, and accounted for 2 percent of the total income taxes collected.
Suarez made a statement as he urged Congress to prioritize the passage of the tax amnesty bill, instead of the speedy passage of the proposed “Trabaho law.”
According to Suarez, the passage of Tax Reform for Acceleration and Inclusion (TRAIN) 1 only worsened the condition of the economy despite the P1.41- trillion total revenue collection in the first half of 2018, which was reportedly 9 percent higher than the target.
Tax amnesty is Part B of the Package 1 of the TRAIN 1, which seeks to grant amnesty on all unpaid internal revenue taxes while relaxing the Bank Secrecy Law.
The “Part B” will grant amnesty on all unpaid internal revenue taxes imposed by the national government for taxable year 2017 and prior years. The measure is now pending before the House Committee on Ways and Means.
Meanwhile, the Trabaho law is now under plenary deliberations.