MANILA – Economists under the Foundation for Economic Freedom (FEF) have expressed support for the rationalization of fiscal incentives under the proposed second phase of the administration's tax reform program otherwise known as Tax Reform for Acceleration and Inclusion 2 (TRAIN 2).
In a statement issued Wednesday, the group commended the guiding principles behind the further rationalization of fiscal incentives, which include linking incentives to performance and limiting the focus of incentives to sectors that will generate economic benefits such as employment and exports, among others.
Following at the heels of TRAIN which took effect at the beginning of this year, TRAIN 2 aims for broader reforms by pushing for changes in corporate income taxes and fiscal incentives.
The think tank on economic policy said it is also in favor of phasing out all existing incentives except for a subset of companies which are employment-intensive, and are likely to move to other countries without incentives; as well as phasing out redundant incentives. The group also recommended accompanying TRAIN 2 with administrative reforms that will improve the professionalism, efficiency, and accountability of taxing authorities.
It also supported the retention of the 40 percent optional standard deduction (OSD) and the reduction of corporate income tax rate to 25 percent. "We support further the retention of the 40% OSD (Optional Standard Deduction), rather than a reduction to 20%, in line with the principle of making tax compliance easy and simple," FEF said in the same statement.
"We support the reduction in the corporate income tax rate to 25% or even lower, should government finances allow it, in order to align the country’s tax rates with the rest of ASEAN," the think tank group added. The FEF is a public advocacy organization dedicated to advancing the cause of economic and political liberty, good governance, secure and well-defined property rights, market-oriented reforms and consumer protection.
Among the notable personalities of the group include former Prime Minister and FInance Secretary Cesar Virata and former Economic Planning Secretary Gerardo Sicat. Its board of trustees is chaired by former Finance Secretary Roberto de Ocampo. (PNA)
