DOF to Peza: Justify big subsidies  for firms, stop attacking tax reform

THE Department of Finance (DOF) is asking the Philippine Economic Zone Authority (Peza) to explain to Filipino taxpayers why it insists on subsidizing at their expense the multibillion-peso dividends and profits of large corporations that do not actually need such perks, instead of supporting President Duterte’s directive to fix the corporate tax system.

Finance Assistant Secretary Antonio Joselito G. Lambino II said Package 2 of the Comprehensive Tax Reform Program (CTRP) aims to rationalize tax incentives now enjoyed by just a select group of mostly big businesses located in large cities. It also aims to level the playing field for some 90,000 small and medium enterprises (SMEs) all over the country that currently pay the region’s highest corporate income-tax (CIT) rate of 30 percent.

He said the Peza should be explaining their side to taxpayers rather than making an 11th-hour appeal to Duterte to reconsider his directive supporting CIT and fiscal incentives reform that, the DOF has insisted, will benefit more than 99 percent  of businesses.

Lambino said the proposed bill will actually continue to provide incentives to businesses, including SMEs, that will lead to increased investment inflows and create more jobs, contrary to notions that it will eliminate tax incentives altogether.

“Peza [Director General Charito B. Plaza] is free to talk to the President. But the President already approved this CTRP as early as January 2018 in a Cabinet meeting and reiterated this in his State of the Nation Address [Sona]. We should not stand in the way of a presidential directive,” Lambino said.

Lambino was responding to reports quoting Plaza as saying that she will talk to the President about her misgivings on the CIT reform bill pending in Congress.

Disputing Plaza’s claim that neither Peza nor its locators were consulted in the crafting of Package 2, Finance Undersecretary Karl Kendrick T. Chua recalled that several consultations were held with Peza and other stakeholders.

“In fact, we took into consideration Peza’s comments, which was why several changes were made to the original Package 2 proposal. During our consultations with Director General Plaza, she even agreed to the principles of Package 2—that it be performance-based, targeted, time-bound and transparent,” Chua said.

Following such consultations with Peza officials and industry players, several adjustments were made to Package 2 to take into account their concerns including: retaining Peza’s power to extend incentives to most projects; keeping the one-stop-shop function; and retaining the provision “in lieu of local business taxes” on the grant of special rates for locators.

Chua made it clear that the DOF remains open to discuss with Peza officials their lingering concerns about Package 2, in keeping with the President’s call to have this tax reform signed into law by the end of the year. The House of Representatives approved in September its version of CTRP Package 2, which it dubbed Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho) Act.

Meanwhile, the Senate is still deliberating on the CIT reform bill introduced by Senate President Vicente C. Sotto III and has called it the Corporate Income Tax and Incentives Reform Act.

 

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