THE economic reforms under the Duterte administration have supported business sector growth, but more needs to be done to fully lift the country out of the pandemic-induced recession.
Business leaders interviewed by the BusinessMirror cited the tax reform packages as a major economic contribution, in addition to implementing policies to ease business processes and launching a massive infrastructure drive. Such initiatives are seen to boost job generation, economic spending and investments.
The tax reforms passed so far are the Tax Reform for Acceleration and Inclusion (TRAIN) and Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
“These laws were expected to stimulate demand by putting more money in consumers’ pockets, while also allowing businesses to invest in growth. Unfortunately, their impact was negated by the Covid-19 pandemic,” Management Association of the Philippines (MAP) National Issues Committee Chairperson Rizalina Mantaring said.
TRAIN, which was implemented in 2018, lowered and rationalized personal income. It adjusted excise tax on oil and automobiles and introduced excise tax on sweetened beverages, in addition to increasing sin taxes.
Collection from the first tax reform package is allocated to fund education, health care, infrastructure and social mitigating measures, among others.
CREATE underwent a few revisions before being finally enacted just earlier this year. It reduced corporate income tax rate to 20 percent from 30 percent for domestic corporations with net taxable income of P5 million and below and have total assets of P100 million and below effective July 1, 2020. All other local firms and resident foreign companies are imposed a 25-percent income tax.
Last month, the Fiscal Incentives Review Board finalized the implementing rules and regulations (IRR) of CREATE. Apart from incentives, the IRR also covers the Strategic Investment Priority Plan, which will provide fiscal and non-fiscal support on certain industries to encourage investments.
The German-Philippine Chamber of Commerce and Industry (GPCCI) said that launching the tax reform program has addressed the long-overdue rationalization of both personal and corporate income taxes and tax incentive system for investors.
“Especially, the passing of CREATE was very important as this provides clarity for already existing businesses that invested in the Philippines but also for new potential investments,” the business group added.
Still, Mantaring said that, “it also remains to be seen how the rationalization of incentives in the special economic zones will impact the decisions of current and potential locators.”
Meanwhile, Philippine Chamber of Commerce and Industry (PCCI) Chair Alegria Limjoco also included on the list the passage of the Ease of Doing Business Law, which prescribed a period for government agencies to process transactions. In addition, the law also mandates them to streamline their process and eliminate unnecessary procedures.
“The economic reforms helped in having a fast-growing economy prior to Covid-19 and provided cushion when the pandemic struck,” she said.
More needed to be done
While the Duterte administration addressed some major business concerns, the industry representatives polled by this newspaper said more is yet to be accomplished.
For example, the GPCCI pushed for the passage of the following bills: amendments to Public Service Act (Senate Bill 2094), amendments to Foreign Investments Act (Senate Bill 1156), and amendments to Retail Trade Liberalization Act (Senate Bill 1840).
The business group said doing such can help German companies engaged in green technologies to participate further in the country’s Build, Build, Build program.
“All these reforms can boost the country’s competitiveness in the region, support stronger job generation, inclusive growth and therefore, support a speedy economic recovery,” it added.
Mantaring agreed, noting that opening up the economy to foreign investments can help in reviving the already ailing economy.
This, in addition to full utilization of the Regional Comprehensive Economic Partnership (RCEP), she said. One of the biggest accords on economic cooperation, RCEP was signed by 10 Association of Southeast Asian Nations (Asean) member states and five Asean FTA partners, including Australia, China, Japan, South Korea and New Zealand in November last year.
Meanwhile, GPCCI said that easing travel restrictions can also help support economic recovery.
“We find…rigorous requirements on acquiring exemptions. Thus, we appeal that the government look and prioritize creating a ‘green lane’ for businesses and further streamline the requirements as all business individuals shall undergo strict quarantine upon arrival anyway,” it added.
For the next administration
The business leaders said that the next leaders should focus on promoting digitalization, which has been highlighted in the pandemic due to mobility restrictions.
Limjoco said there should be programs to help the country prepare for the Fourth Industrial Revolution.
“Preparing for the economy of the future by accelerating digitalization of government and passing enabling laws for a digital economy is also important,” Mantaring said.
Earlier this year, the Department of Trade and Industry said it aims to boost the contribution of the e-commerce industry to P1.2 trillion by 2022, which is equivalent to 5.5 percent of the country’s gross domestic product.
The PCCI official added that the micro, small and medium enterprises—which is a major economic driver—should be given continued assistance in terms of financing, training and market access.
With the national election just around the corner, the business and private sectors keenly await what more is in store for them.