MANILA, Philippines — The Management Association of the Philippines (MAP) is pushing for the immediate reduction of corporate income tax rates to make the country more competitive against its neighbors in the region.
In a letter sent to Finance Secretary Carlos Dominguez III, MAP said it agrees with the view of the Department of Finance (DOF) that lowering corporate income tax rates in the country to 25 percent, as proposed under Package 2 of the Comprehensive Tax Reform Program (CTRP), will boost the competitiveness of the country.
“We agree with the Department of Finance that TRAIN (Tax Reform for Acceleration and Inclusion) 2, as a package, will help the country become more competitive with the rest of the world by lowering the corporate income taxes from the current 30 percent, the higher among our ASEAN peers,” MAP said.
The industry group also supported the package’s provision seeking to rationalize the country’s tax incentives system to make it time-bound, performance-based, simple and streamlined.
However, MAP pressed for the immediate implementation of the income tax adjustment, as it said other member-economies in the ASEAN are also considering to adjust their income tax rates.
“We believe it is important to commit to a definite timeline for the reduction of income tax rates to have predictability that can help decision making on investments and business plans. But we suggest starting in 2019 rather than 2020,” MAP said.
“Our ASEAN neighbors are contemplating even further reductions in their income tax rates — making this an imporant step. And, raising the need to go beyond 25 percent to 20 percent, even 15 percent as soon as it can be afforded,” it added.
Package 2 of the CTRP seeks to reduce corporate income taxes to 25 percent from the current 30 percent. It also involves the rationalization of incentives to make them performance-based, targeted, time-bound and transparent.
However, the DOF’s proposal pushes for a conditional cut in corporate income taxes, wherein every one percentage point reduction in the tax rate will only be applied if the government generates P26 billion — equivalent to 0.15 percent of gross domestic product—by rationalizing fiscal incentives.
As such, the first tranche of corporate tax cuts, if any, will be implemented starting 2020.
In terms of fiscal incentives, the DOF said it will ask Congress to modernize the country’s fiscal incentives system to ensure that these are performance-based, time-bound, targeted and transparent.
The DOF said it also proposing for the expansion of the functions of the Fiscal Incentives Review Board (FIRB) as an overall administrator which oversees all investment promotion agencies (IPAs) in the country.
Meanwhile, MAP said it also agrees that there is a need to enforce better tax compliance, which can be done by relaxing the country’s bank secrecy rules.
“It is necessary to widen the tax base and enforce better compliance. The relaxation of our bank secrecy laws, coupled with proper safeguards against abuse, is an essential tool in doing that. It will also encourage more to avail of a general tax amnesty, which we support,” it said.
The amendments in the Bank Secrecy Law, as well as the implementation of a tax amnesty program, is included in the Package 1B of the CTRP. It will supplement the TRAIN Act and yield an additional P38.9 billion in revenues for the government, the DOF said.