FOREIGN business chambers are in favor of a delayed passage of the second tax-reform measure to provide lawmakers and stakeholders more time to discuss the disputed provisions of the bill.
Julian H. Payne of the Canadian Chamber of Commerce of the Philippines (CanCham) said his group is rallying behind senators in their move to further study the Tax Reform for Attracting Better and High-quality Opportunities (Trabaho) bill. Senators last week admitted it will be difficult to fast-track the passage of the second tax- reform measure.
They said time constraints and the need to dig deep into the controversial content of the bill make it doubly hard to turn it into a law by December, as desired by President Duterte. However, Payne argued the delay is understandable, as it will give lawmakers and businessmen the leeway to talk things through.
“In this respect, a delay in approval to allow more time for an open and constructive discussion with affected stakeholders will be beneficial and will hopefully facilitate broad-based support for the reform essential to its implementation,” said Payne, president and CEO of CanCham, in a text message to the BusinessMirror.
The CanCham is particularly concerned about the impact of the Trabaho bill on several investment areas, including business-process outsourcing, manufacturing and mining. He said these three industries will most likely bear the brunt of the second tax-reform measure.
“These are three areas with great potential for increasing employment outside the NCR [National Capital Region] and for additional tax revenue needed for the ‘Build, Build, Build’ infrastructure program, which CanCham also supports,” Payne added.
The Trabaho bill—the second package of the Comprehensive Tax Reform Program—will reduce corporate-income tax (CIT) to 25 percent, from 30 percent. It will also rationalize fiscal incentives granted to locators in economic zones, which will make the perks time-bound.
‘Unintended consequences’
However, the CanCham chief clarified his group is in favor of reforming the country’s tax structure sans the “unintended consequences.” He specified the lowering of CIT as one provision the chamber supports.
“A reform of the Philippine tax system is essential and urgently needed for long-term sustained economic and inclusive social development of the country. The Canadian Chamber of Commerce of the Philippines supports the initiative by the administration to proceed with tax reform as a priority,” Payne said.
“In particular, it supports a significant reduction in corporate income tax in a phased approach, starting earlier in 2019 and down lower to the Asean [Association of Southeast Asian Nations] average of about 20 percent. However, it is important that tax reforms do not have unintended consequences, including discouraging foreign and domestic investments,” he added.
On the other hand, John D. Forbes of the American Chamber of Commerce of the Philippines (AmCham) said the senators cannot be blamed if the Trabaho bill goes beyond the President’s desired timetable.
“I cannot second-guess the senators who have pointed to a crowded agenda and too little time for hearings from the many stakeholders and the plenary debate. But the President is asking for passage before Christmas, which is about eight weeks of session,” said Forbes, senior advisor of AmCham, in a text message to the BusinessMirror.
He added it is difficult to identify yet if it will make any difference should the Trabaho bill be passed next year. “That depends on the final version of the bill, which is not yet known,” he explained.