The Department of Finance (DOF) expects the creation of around 1.4 million jobs between 2021 and 2029, when the corporate income tax (CIT) will have been cut to 20 percent under the second package of the Comprehensive Tax Reform Package (CTRP), or the Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho) bill.
Based on DOF estimates, the proposed lowering of the CIT by 2 percentage points every two years starting 2021 until 2029 will create over a million jobs by freeing up more capital for firms to invest and hire more workers.
Finance Assistant Secretary Antonio Joselito G. Lambino II said that once approved by Congress, the law will create an estimated 113,944 jobs in 2021 all the way up to 1.4 million in 2029.
Lambino’s projection is consistent with Finance Undersecretary Karl Kendrick T. Chua’s earlier statement during the first Senate hearing on corporate tax reform, where he emphasized the lowering of CIT’s positive impact on job generation.
“With lower tax rates, such a proposal is hardly inflationary while creating over a million jobs over the medium term as firms expand with more money at their disposal,” Chua said.
For instance, at a 26-percent CIT rate in 2023, an additional 171,940 jobs will be created: with the numbers increasing to 252,031 in 2025; another 361,767 in 2027; and 511,021 more in 2029; or a total of 1.4 million jobs over the 10-year period, according to the DOF.
In addition, Lambino said, the proposed tax incentives reforms will also result in net employment gain, as it is very clear that firms that create more jobs will be prioritized in the grant of tax incentives under the “considerable generation of employment” criteria in House Bill 8083.
“This pro-investment tax-reform package is seen to be even more attractive to firms because it will give them additional incentives on labor, domestic input and training under the proposed menu of tax incentives, while activities that already provide positive benefits to society, such as those that develop the countryside, create jobs and contribute to exports can continue to enjoy tax incentives,” Lambino said.
Under the proposed bill, firms outside Metro Manila and adjacent urban areas are entitled to an additional two years of incentives on top of the regular five-year maximum to promote inclusive growth and rural development.
Last month the DOF disputed critics’ claim that the Trabaho bill will, in fact, cause worker dislocation but the claim was met with skepticism by the Senate Ways and Means Committee chairman.
Sen. Juan Edgardo M. Angara, who chairs the ways and means committee of the Senate, doubted the DOF assurance on hearing from a labor official that they are still assessing the possible impact of the measure on jobs, given widespread fears among business groups that the loss of fiscal incentives from key industries would outweigh the vaunted generation of more funds for investments as a result of the reduction of the CIT.
During the hearing, the Department of Labor and Employment revealed that based on their job displacement monitoring, 30,000 jobs in the industry and services sectors were lost in the first quarter of 2018.
Following the passage of House Bill 8083, the Semiconductor and Electronics Industries in the Philippines Foundation Inc. released a statement that the measure would force them to lay off 140,000 workers.
Chua told financial reporters that the implementation of the CIT cuts under the second package of the CTRP will generate more funds, in turn, enabling more companies to invest and generate more jobs.