SENATORS should pass the Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho) bill by December, or else the scheduled reduction of corporate income tax (CIT) will be delayed, the country’s trade chief has warned.
In a recent interview with reporters, Trade Secretary Ramon M. Lopez admitted time is not on the side of the government, which is pushing for the legislation of the Trabaho bill.
The Department of Trade and Industry (DTI) is still deliberating with the Department of Finance (DOF) proposed changes to the measure, he added.
“Let’s just say [the discussions are still] ongoing because we do not want to discuss the details [in public]. That is really part of internal government discussions on how we can craft and fine-tune the provisions of the Trabaho bill for minimal risk,” Lopez said.
Asked what will happen if the bill fails to get the Senate’s nod by December, Lopez said the timetable for CIT reduction “will be delayed.” He added delaying passage of the Trabaho bill will only extend the uncertainty surrounding the country’s investment regime.
“We want to create also the certainty because the investing public, at least, will be sure of the new provisions once it is enacted into law. The new investors just want to know what will be the final structure,” Lopez argued.
Under the Trabaho bill, CIT, which is currently at 30 percent, will be trimmed gradually to 20 percent in 2029.
It will also rationalize tax incentives granted to locators in economic zones, which is why the measure is opposed by several industries. Locators said they will have to cut down their labor force if the government proceeds with its plan to overhaul the country’s incentives regime.
The trade chief, for his part, is still holding on to hopes that the second package of the tax-reform program will hurdle the Senate within the year. “Hopefully, we can still pass it by December with the provisions that we want that we are discussing with the agencies,” he said.
An informal poll taken by the BusinessMirror last week showed most senators doubting if the chamber can find time to approve the House-labeled Trabaho bill, given the expected lengthy deliberations on the 2019 national budget, and the still outstanding issues about Trabaho bill’s predecessor—the Tax Reform for Acceleration and Inclusion (TRAIN). Senators want the DOF to resolve these, given the widespread blame heaped on the TRAIN law for deepening the impact of inflation, which reached 6.7 percent in September and again in October.
Longer ITH
A document obtained from a highly reliable source, meanwhile, showed the DTI appealing to the DOF to stretch the income tax holiday to five years from three years under the Trabaho bill. It also moved that similar incentives be extended to five years from two years to keep the country’s investment regime on a par with its Southeast Asian counterparts.
“[The DTI] proposed that income tax holiday to be extended to five years instead of three years, and other income-based tax incentives to five years instead of two years.
“This is to make our income tax-based incentives competitive with other [Southeast Asian] countries, more specifically, Vietnam, Malaysia and Singapore,” the document read.
Lopez said the government is optimistic senators will pass the Trabaho bill before the year ends to conclude the issue on tax and incentives.
“For us [in the government], of course, we want this issue to be settled already. [We want the bill to be] passed with the corrected provisions as soon as possible,” he added.