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Tax relief not on government tool kit for virus-hit business

Finance Secretary Carlos G. Dominguez III

THE government is not considering any form of tax relief for businesses as the administration aims to cushion the impact of the coronavirus outbreak.

Unlike what other countries have done or are planning to do, the Philippine government’s tack will not include giving tax relief, officials said on Wednesday.

“I never mentioned tax relief,” Finance Secretary Carlos G. Dominguez III said. “We have asked DOT/Tieza [Department of Tourism and Tourism Infrastructure and Enterprise Zone Authority] to creatively use their available funds [+14B] to support the tourism industry.”

Trade Secretary Ramon Lopez also said there was no formal proposal during the Economic Development Cluster Meeting on Tuesday to give tax breaks.

However, Lopez said this may be done as a “last resort.”

Asked if they also plan to give tax breaks to businesses affected by the coronavirus outbreak, the trade chief told the BusinessMirror: “Wala pa sa ngayon, Hindi pa namin iniisip kasi mga last resort na yan. In fact, ang mas importante yung mga ganyan yung maluwag na repayment ang mas importante at kung gusto nila umutang, pwede naman kami magpautang din [None as of now. We’re not contemplating that yet, it’s a last resort. In fact, what’s important are easing repayment and more important, for us to be ready with credit lines if they need to borrow],” he said.

Several countries like Malaysia have announced their respective economic stimulus packages to mitigate COVID-19 impact.

Malaysia is eyeing to defer the monthly income tax installments of their businesses in the tourism sector while hotels will be spared from 6 -percent service tax between March and August this year.

Meanwhile, Thailand will also cut its withholding tax for businesses from 3 percent to 1 percent from April to September, and they will be offered tax deductions on interest rates, as well as on wage expenses. Its revenue department also extended the deadline for payment to ease the taxpayers’ burden amid the outbreak, according to international reports.

Non-fiscal measures

At the moment, Lopez said they are banking more on tapping non-fiscal measures as he said it would also be difficult for the government to give tax breaks at this point considering that it will be incurring an increased deficit this year.

Dominguez on Tuesday said the government expects this year’s deficit to widen to 3.6 percent of GDP, breaching the administration’s deficit target of 3.2 percent of GDP for the year. To finance the projected revenue losses which could reach P91 billion if the virus drags until midyear, Dominguez said the government will be increasing its borrowing level. In 2019, the government posted a wider deficit of P660.2 billion or 3.55 percent of GDP as expenditures outpaced revenues.

“Kung wala kang resources at nangungutang ka pa, I mean syempre mabigat din magbigay ng ganon. E, may Citira na nga tayo, e, na nira-rationalize [If you lack resources and need to borrow, then it’s quite a burden to give such relief. Note, we still have Citira which we are rationalizing],” he said. He was referring to the pending bill known as the Corporate Income Tax and Incentives Rationalization Act which will gradually reduce the current corporate income tax rate from 30 percent to 20 percent by 2029.

If the virus drags on until the middle of the year, he said the Department of Trade and Industry can also persuade malls to lower the leasing rate or at least give discounts on rental fees to help micro, small and medium enterprises amid the outbreak.

“The three big [malls], possibly can look into this, like being less strict when it comes, say, to paying rental,” he said, in a mix of English and Filipino. The trade chief said the DTI in the future will also consider giving regulatory relief to firms like deferred payments on bank loans or lowering of interest and waiving fees, among others.

In a press conference following the EDC meeting late Tuesday, Lopez also revealed the sectors with reports of negative impact from COVID-19, as well as those with no negative impact.

“When you say with negative impact, basically we are talking of sectors or companies with inventories of two to three months but they are starting to experience delayed delivery especially coming from China,” he said. “Our COVID mechanism is to look for alternative suppliers and that of course, they expect sales to be affected.”

Among the sectors with reports of negative impact are industries like aerospace, tourism, auto and autoparts, bananas, biscuits,
carrageenan, electronics, footwear, furniture, iron and steel, pharmaceutical, plastics, processed foods, textiles.

On the other hand, sectors with reports of no negative impact are appliances, chemicals, copper and steel, leather, as well as printing.

Steel sector

Lopez explained that the steel industry was also grouped in the sector with no negative impact since there is still increasing local demand for steel amid lower prices because of the government’s “Build, Build, Build” program.

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