SENATORIAL candidates belonging to the opposition coalition Otso Diretso on Monday said economic activities that are crucial to rural communities, such as nonprofit hospitals and cooperatives, should be allowed to keep their tax incentives.
Human-rights lawyer and law dean Jose Manuel “Chel” I. Diokno said the government should allow nonprofit hospitals and cooperatives to keep their incentives under the proposal to rationalize tax perks. He argued these two enterprises play crucial roles for the rural poor.
“First, when it comes to cooperatives—[which] are really the mechanism for empowering the poor—they should still be given the same tax exceptions that they enjoy today,” Diokno told reporters on the sidelines of a business forum in Makati.
“Second, nonprofit hospitals [should be allowed to hold onto their incentives, too]. They should still be granted tax benefits because they are not there for the money anyway,” he added.
The government intends to rationalize incentives under the proposed Tax Reform for Attracting Better and High-Quality Opportunities, or the “Trabaho” bill.
The measure seeks to gradually lower corporate income tax (CIT) to 20 percent by 2029, from 30 percent. In exchange, incentives provided to firms operating in economic zones, such as the 5- percent tax on gross income in lieu of all local and national taxes, will be removed.
Foreign investors, both prospective and existing, opposed
the component on rationalization of incentives, as this could compel locators
to move out of the
Philippines, which, in turn, will result to job losses.
The Trabaho bill was approved in September of last year by the House of Representatives, but has yet to slip past the Senate. Deliberations on the measure will have to wait until the 17th Congress resumes session for the last time on May 20.
Diokno made clear that he is in favor of restructuring the menu of incentives, but said this should be done thoroughly, and that investment areas critical in the alleviation of poverty must be permitted to keep their tax perks.
Diokno added he has no problem with reducing the CIT, but recommended authorities to improve their collection efforts. He asked what is the point of passing tax laws after all when collection targets are missed.
“When I looked at the data in 2018, the government was not able to collect 17 percent when it comes to VAT [value-added tax] and 12 percent in excise taxes. That is a pity. We go to all the trouble of passing these tax laws, but then the taxes are not collected, which are supposed to be the lifeblood of the government,” the senatorial candidate said.
Last year the Bureau of Internal Revenue fell short 17.8 percent of its P435.88 billion target collection from VAT at P358.27 billion. The agency also lagged 12.67 percent of its P332.8 billion objective in excise taxes at P290.64 billion.
Meanwhile, women’s rights advocate and senatorial aspirant Samira Gutoc urged the government to reexamine its intention to rationalize incentives.
If elected senator, Gutoc said she will refile the Trabaho bill in such a way it will not reduce the number of tax perks, but increase them. She argued the goal of the government must be to land more investors in the Philippines.
Former Solicitor General and senatorial hopeful Florin “Pilo” T. Hilbay advised the government to assess the costs and benefits of reducing the corporate tax and doing away with some incentives.
Hilbay said one compromise the government can strike with economic zone firms is to allow them to retain for a short period their tax perks once the Trabaho bill is passed into law. This, he argued, could minimize the losses investors will have to endure from the removal of incentives.