MANILA, Philippines — The new tax reform package proposed by the Department of Finance (DOF) is designed to establish a tax incentives system that would attract investments in high technology and advanced industries.
In a text message sent over the weekend, Finance Secretary Carlos Dominguez said the new tax incentives system under Package 2 of the Comprehensive Tax Reform Program (CTRP) seeks to encourage the entry of industries such as robotics, space technology and advanced health care.
“We will craft an incentives program that will attract new high-tech sunrise industries, such as robotics design and manufacture, industries in space technology, such as satellites, as well as advanced health care with focus on geriatic care,” Dominguez said.
CTRP Package 2, which was submitted to the House of Representatives last Jan. 15, proposes the reduction of corporate income tax rates to 25 percent from the current 30 percent, and the rationalization of fiscal incentives enjoyed by certain business sectors.
Only industries that meet the criteria based on performance, transparency and target would have their incentives retained, the DOF said. The package also proposes for a sunset provision for incentives.
It also seeks to expand the functions of the Fiscal Incentives Review Board (FIRB) as an overall administrator which oversees all investment promotion agencies (IPAs) in the country.
Due to the reforms the DOF is seeking to introduce in the country’s tax incentives system, Dominguez said there may be a possibility for multinational companies to relocate their offices to other countries in the region, or rethink their expansion plans in the Philippines.
However, he said there is still a need to overhaul the tax incentives program as some corporations have been enjoying tax perks for over 40 years.
“That is possible, but some companies have enjoyed tax incentives for over 40 years. No other country is as generous as the Philippines in giving long term tax incentives,” the finance chief said.
Dominguez said corporations who have long been enjoying tax incentives should be ready to give up their perks and start giving back for the sake of the country’s development.
“By taking advantage of our generosity, these companies have avoided contributing their fair share in the development of our educational system and infrastructure. This is unfair to the other companies that pay the full tax rates,” Dominguez said.
“To enjoy incentives is to enjoy a privilege. In a just society, privileges are meant to be distributed fairly and not just to a few. Companies which have long enjoyed incentives should now reciprocate the government’s generosity,” he added.
Over the long term, Dominguez said the CTRP would enable the Philippines to develop an educated work force and build infrastructure that would support industries by easing transportation and lowering costs of doing business.
He said these would ultimately be the factors that would make companies consider investing in the country rather than its tax incentives system.
Source: The Philippine Star