Tax incentives enjoyed by companies are likely to stay, after the business groups and the Aquino Cabinet agreed in principle to shelve the proposed bill removing the income tax holiday and reforming the fiscal incentives, an industry group said over the weekend.
Makati Business Club executive director Peter Angelo Perfecto told reporters Friday the government agreed to keep the status quo on the current fiscal incentives regime to prevent the erosion of the country’s competitiveness as an investment destination.
Perfecto said the Philippine Business Group and Joint Foreign Chambers reached a consensus with the economic cluster of the Aquino Cabinet on putting the fiscal incentives rationalization bill and other proposed amendments to incentives laws at the back burner.
Perfecto said while the three business-related bills, including the Customs Modernization Tariff Act, Right of Way and the bill creating the Department of ICT, might see passage under the current administration, Congress would not likely pass the fiscal incentives rationalization bill.
“We can wait for the next administration rather than rush a bill where we lose our competitiveness. So we’d rather stay [status quo],” Perfecto said, adding the business groups supported the position of the Philippine Economic Zone Authority.
The fiscal incentives rationalization bill aims to harmonize the incentives enjoyed by Peza, Board of Investments and other incentive-giving bodies and replace the income tax holidays with reduced corporate income taxes. It also seeks to avoid double compensation or double availment of incentives.
“Peza director general Lilia De Lima said that if in any way, it will affect our competitiveness then we would rather not push for it. There are some in business who share that position. It has to improve our competitiveness, not the other way around,” Perfecto said, referring to the fiscal incentives rationalization bill, which is being pushed by the International Monetary Fund.
The Finance Department has been pushing for the removal of the income tax holiday in lieu of reduced corporate income tax.
Proponents of the fiscal incentives rationalization bill claimed that the government lost P148 billion in potential revenues in 2013 due to various fiscal incentives.
The Board of Investments, an attached agency of the Trade Department, already agreed to a 15- percent corporate income tax over a period of 15 years, but Peza said this would make the country’s incentives less competitive.
Peza said Vietnam and Indonesia offer income tax holidays of more than 10 years.
The business groups called for a dialog with the Cabinet economic cluster amid the disagreement among government agencies on the proposed amendments to the country’s tax incentives regime.
Perfecto said both the business sector and the government committed to listen to each other to come up with better and more sound measures to uplift the state of Philippine business.
Both Peza and BoI currently provide up to six-year income tax holiday, that can be extended by another two years, to qualified foreign and local companies investing in pioneer projects.
Those without fiscal incentives are required to pay a corporate income tax rate of 32 percent.