THE foreign chambers in the Philippines lacked transparency when they said passing the Corporate Income Tax and Incentives Rationalization Act (Citira) would lead to unemployment, the Department of Finance (DOF) said on Monday.
In a statement, Finance Undersecretary Karl Kendrick Chua said the Joint Foreign Chambers of the Philippines (JFC) was not able to provide a basis for these “imaginary job losses.”
the government remains firm in its estimates that the Citira or the proposed second
package of the comprehensive tax reform program (CTRP) would
create 1.5 million jobs.
“We have been listening to them and asking them in almost every meeting for two years now to give us more details on what kinds of jobs they are referring to, in which industries, and in which areas of the country, so we can help,” Chua said.
“Secretary Lopez of the Department of Trade and Industry, who chairs both Peza [Philippine Economic Zone Authority] and BOI [Board of Investments], already said that we are open to continue supporting footloose industries. So why won’t they give us more details on their claims? Their lack of transparency is a little bit suspicious, don’t you think?” he added.
Chua also said many JFC members, who are currently paying the regular income tax rates, will also benefit from the Citira with the reduction in corporate income tax (CIT) rates.
The DOF official noted that apart from the reduction in CIT rates, companies involved in high labor-intensive industries can also benefit from the additional 50-percent deduction on labor, under Citira.
He said this also means the Citira grants performance-based incentive that guarantees jobs. Through the incentives, firms can maximize their incomes while providing jobs.
Chua said another incentive is additional deductions for training or upskilling. Companies that invest in the training and upskilling of their employees get an additional 100-percent deduction or a total of 200 percent on their training costs.
This, he said, will benefit industries such as those in the business- process outsourcing sector, which has been experiencing problems in the supply of skilled labor.
The DOF official said the proposed law provides an additional 50-percent deduction on local purchases of inputs to link small and medium enterprises to the supply chain, enabling them to grow and create jobs.
“We must remember that this reform must be treated as a package. We cannot pursue one aspect, which is the reduction of the CIT rate, without pursuing the other, which is the modernization of the fiscal incentive system, if we want to be fiscally prudent,” Chua said.
President Duterte reiterated in his fourth State of the Nation Address (Sona) in July his request for Congress to pass the Citira bill.
The proposed law aims to energize micro, small and medium enterprises (MSMEs) by gradually reducing the CIT rate from 30 percent to 20 percent.
The bill also seeks to reform the country’s fiscal incentives system to make it performance-based, targeted, time-bound and transparent.
Following the President’s directive, Finance Secretary Carlos Dominguez III said the proposed CIT cut and rationalization of incentives will indeed boost MSME growth.
DOF said under the current corporate taxation system, a select group of 3,150 corporations registered under IPAs enjoy discounted effective CIT rates of 6 percent to 13 percent; while small and medium-sized businesses, which employ a majority of Filipino workers, pay the regular tax rate of 30 percent, which is the highest in the region.
Image credits: Toto Lozano / Presidential Photo