The Finance Department said the implementation of the proposed Corporate Income Tax and Incentives Rationalization Act or CITIRA bill will generate 1.5 million jobs, debunking the claims by the Joint Foreign Chambers of the Philippines that it could lead to job losses.
Finance Undersecretary Karl Kendrick Chua challenged the JFC to look more closely at the proposed second package of the comprehensive tax reform program, instead of prematurely fretting over imagined job losses.
Chua also called on the chambers’ leaders to support their claims about the domestic jobs that would ostensibly be affected or lost once the CITIRA bill was signed into law by providing the names of the companies and the number of jobs to be affected in each company.
His statement was in reaction to the claims of John Forbes, representing the JFC in the Senate committee hearing last week, that the passage of the CITIRA bill would lead to the loss of jobs. Forbes is a senior adviser at the American Chamber of Commerce of the Philippines, a JFC member-organization.
“Our numbers are transparent. Companies will reasonably invest at least 50 percent of their additional money from the reduction of the corporate income tax rate in growing their business. This will mean more jobs—a total of 1.5 million jobs actually. Morever, the new menu of incentives for investors, as proposed in CITIRA, will also encourage job creation and upskilling,” Chua said.
“We hear them. We have been listening to them and asking them in almost every meeting for two years now to give us more details on what kinds of jobs they are referring to, in which industries, and in which areas of the country, so we can help,” Chua said.
“Secretary Lopez of the Department of Trade and Industry, who chairs both PEZA [Philippine Economic Zone Authority] and BOI [Board of Investments], already said that we are open to continue supporting footloose industries. So why won’t they give us more details on their claims? Their lack of transparency is a little bit suspicious; don’t you think?” Chua said.
He also challenged the members of the foreign chambers currently receiving incentives to consider and calculate for themselves what they stand to gain from CITIRA.
He said the Finance Department wanted to transform the incentive system to reward job creation, among other activities that are directly beneficial to the Filipino people.
“For instance, the highly labor-intensive industries can avail of the superior incentives in the form of an additional 50-percent deduction on labor, under CITIRA. Some companies we have met claim that labor accounts for 60 percent of their revenues. So instead of deducting around 60 percent from revenues, they can deduct 90 percent and reduce their taxable income. Under CITIRA, the firm gets a performance-based incentive that guarantees jobs,” he said.
Chua said that under CITIRA, the one-stop-shop functions of the investment promotion agencies like PEZA would remain, “so there is nothing to be afraid of.”
“So I am not sure why the leaders of some foreign chambers want to keep the present system that incentivizes profit, rather than incentivizing the behavior that directly benefits the Filipino people. Creating jobs and ensuring that our citizens are prepared for the employment demands of the future are the highest priorities of this reform,” he said.
President Rodrigo Duterte reiterated in his 4th State of the Nation Address in July his request for the Congress to pass Package 2 of the CTRP—the CITIRA bill—that aims to energize micro, small and medium enterprises by gradually reducing the CIT rate from 30 percent to 20 percent.
In his SONA, President Duterte said Package 2 would benefit MSMEs. The bill also seeks to reform the country’s fiscal incentive system to make it performance-based, targeted, time-bound and transparent.