The Finance Department wants Congress to amend the Tax Incentives Management and Transparency Act law to enable the government to make public the list of corporations that receive such subsidies and how much they translate into foregone revenues.
Finance Undersecretary Karl Kendrick Chua said the proposal would be a part of government efforts to make fairer, targeted, more accountable and transparent the current system of corporate taxation, which he described as a “chaos of priorities that demand harmony.”
Chua said by amending the Timta law and making incentives transparent, the public would know which group was receiving incentives and which one was paying for it in the form of higher taxes. He said the public should have the right to know who were benefiting from their hard-earned money.
Data from the Finance Department showed that in 2016, some 3,102 corporations paid discounted corporate income tax rates of 6 percent to 13 percent granted by 14 investment promotion agencies on the strength of 336 special laws for corporations.
Chua said while these corporation were enjoying reduced taxes, some 90,000 small-and-medium enterprises that were employing 2.5 million Filipino workers in the country paid the regular CIT rate of 30 percent, the highest in the region.
“This is what we mean by being transparent. We propose that the names of firms receiving incentives be made public, including the amount of their incentives and contributions to society,” Chua said during a recent hearing of the Senate ways and means committee on the bill seeking reforms in corporate taxation.
He said the government should stop granting hundreds of billions of pesos yearly to only a select group of companies that had already become profitable through lower taxes and other perks and had been enjoying these incentives for decades.
Chua said the proposed reforms in corporate taxation, which comprised Package 2 of the Duterte administration’s comprehensive tax reform program, would be “pro-investment and pro-incentive” because it aimed to lower the CIT rate, while broadening the tax base through more prudent grant of tax incentives to businesses and improved compliance.
“We recognize the value of incentives as a key component of a country’s policy toolkit. We assert, however, that incentives should not be given indiscriminately at the expense of building up our more powerful attractions: first, a skilled and hardworking talent pool that needs sufficient human capital investments, second, an ambitious infrastructure development program that requires fiscal commitment, and third, a sizable SME community that deserves to be treated fairly,” Chua said.
The House of Representatives already approved its version of Package 2″•the Tax Reform for Attracting Better and High-Quality Opportunities or Trabaho bill on Sept. 10. The Senate version of the bill is still pending at the committee level.
Chua said the approved House bill, which called for reducing the CIT rate from 30 to 20 percent over 10 years, “is hardly inflationary while creating millions of jobs over the medium term as firms expand with more money at their disposal.”
“Moreover, we will continue to support firms or activities that are priority with tax incentives that are performance-based, targeted, time-bound, and transparent,” Chua said.
