MANILA -- Officials of the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) are hopeful that government will consider their suggestions on the proposed corporate income tax (CIT) reform, noting that while the group supports the measure, there are certain provisions that may hurt the industry.
In a briefing Thursday, SEIPI President Danilo Lachica said they support the move to reduce CIT rates in the country, which currently is at 30 percent, the highest in Asia.
“In fact, if anything, we want that (measure) accelerated because essentially what’s gonna happen is it’s going down to 20 percent by 2029. And if it’s possible to accelerate that then better for the corporations here in the Philippines,” he said.
Under the Department of Finance-proposed tax reform Package 2, CIT will be reduced by two percent every other year starting 2021.
The measure seeks to support the growth of micro, small, and medium enterprises (MSMEs), which comprise around 99 percent of all businesses in the country and employ about two thirds of total workers in the country.
The government also wants to rationalize tax incentives, noting that big, profitable companies continue to enjoy perks at the expense of revenues that government badly needs to fund its programs.
DOF has said that in 2015 alone about PHP86.3 billion worth of income tax incentives were extended to firms that paid PHP141.8 billion worth of dividends to their shareholders.
Lachica said that while they support the proposed tax reform, they have several concerns about it.
SEIPI on Thursday released a position paper on the CIT reform and on top of its list is the proposal to retain the autonomy of the Philippine Economic Zone Authority (PEZA).
The group is also proposing the use of 6-7 percent tax on gross income earned (GIE) instead of the 18 percent CIT rate for all national and local taxes, the exemption for indirect exporters from paying value added tax (VAT), the retention of customs duty exemption for equipment and materials in economic zones, exclusion of equipment as among the companies’ properties that should be paid of real property tax, the grant of additional incentives to businesses registered with the Investment Promotion Authority (IPA) that have supplier development activities, and tailored policies for efficiency-seeking and market-seeking investors.
Lachica said most of their members have businesses located in economic zones.
“We’d like to retain the autonomy of PEZA because in has a formula that works for investments. In fact, previously, up until last year investments in PEZA were strong. So, under that regime we enjoy, after the income tax holiday, we enjoy GIE, which is essentially gross income tax,” he said.
The SEIPI president also said that under the version approved by the House of Representatives, the share of local government units (LGUs) on taxes will be remitted by the individual companies instead of PEZA under the current situation.
He explained that this change will be an issue for their members that have sites in various cities.
“How do you explain to their corporate headquarters the different levels of inefficiency, processes. Probably maybe even levels of corruption,” he quipped.
Members of the House of Representatives approved their CIT reform version called Tax Reform for Attracting Better and Higher Quality Opportunities (TRABAHO) last September 10.
Lachica said SEIPI officials have raised these issues during their dialogues with DOF officials.
“Hopefully these (dialogues) address issues that we’re concerned about,” he added. (PNA)
