MANILA – Senator Sherwin Gatchalian on Wednesday said he is open to retaining the 5-percent gross income earned (GIE) tax incentive under the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) Bill, the second package of the tax reform program.
On the sidelines of the Arangkada Philippines Forum 2018 in Pasay City, Gatchalian said the Senate is considering the retention of the 5-percent GIE tax incentive for certain industries depending on their cost-structure.
He, however, said the government should not be giving out such tax perks for an indefinite period. “I do admit that we need to rationalize the concept of giving perpetual incentives,” he told reporters.
The 5-percent GIE tax incentive is given to locators registered with Philippine Economic Zone Authority (PEZA).
The Department of Finance’s (DOF) version of this tax reform package, also known as the Tax Reform for Acceleration for Inclusion Package 2 or TRAIN 2, wants to eliminate the 5-percent GIE tax incentives extended by PEZA to its registered investors. The companies continue to enjoy the perk so long as they are operating inside a PEZA zone.
“The TRABAHO BIll that the House (of Representatives) approved is a much, I think, different version from the DOF version, in the sense that they made lot of adjustments so that jobs will not be lost,” said Gatchalian, who chairs the Senate committee on economic affairs.
“And that’s also the view of the Senate, we will make sure that we will not lose the jobs and make sure that the country will not have a negative image because we’re neglecting our contracts. We want to make sure that this bill, as intended, will make the Philippines competitive with its peers by lowering down corporate income tax to 20 percent eventually,” he added.
He said after discussions with the foreign chambers' membership, he will also be examining the possibility of maintaining support for the electronics and semiconductor, as well as the business process outsourcing (BPO) industries.
“The semiconductor industry and BPO industry is about more or less 20 percent of our gross domestic product, very sizeable industries for our economy. We don’t want that scenario wherein these industries will be weakened, the competitiveness will be lessened, and we want to continuously grow these industries,” Gatchalian said.
Meanwhile, Philippine Association of Multinational Companies Regional Headquarters, Inc. (PAMURI) Director Celeste Ilagan, said the BPO sector is batting to keep the 10-percent corporate income tax rate for regional operating headquarters (ROHQs) under the TRABAHO Bill.
She said the industry does not want to lose another incentive once the TRAIN 2 is passed.
ROHQs already lost the 15-percent preferential tax rate because of TRAIN law, leading to “slight contraction of number of employees in ROHQs,” Ilagan added. (PNA)
