Department of Finance Secretary Carlos Dominguez defended again the government’s proposed corporate tax reform, saying the Duterte administration is working on making a fair system for companies.
Corporate tax reform comprises Package 2 of the Duterte administration’s Comprehensive Tax Reform Program.
The Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) which is filed as House bill 8083, seeks to cut the corporate income tax (CIT) rate by 20 percent gradually from the current 30 percent and remove redundant tax incentives.
Finance Secretary Dominguez said in a forum organized by the Economic Journalists Association of the Philippines, “I expect some resistance; I also expect a lot of people supporting this. Because actually, the smaller firms are going to absolutely benefit from the reduction in taxes. There are those that obviously don’t like it but I think the vast majority will actually be benefiting from it.”
“These are privileges given. It’s a tax privilege. The nature of a privilege is that it can be taken away. It’s not a right,” he added.
“Thus, if you violate the rules or if it becomes burdensome to the economy, and also if it becomes unfair to the rest of the companies, then I think it is necessary for the administration to correct that problem. If you don’t correct the problem, you are actually perpetuating an unfair system. Wouldn’t you want your government to be fair?”, he went on.
In the estimates of the Department of Trade and Industry, the micro, small and medium enterprises account for 25 percent of the country’s total revenue from exports with 60 percent of exporters belonging to the MSME category.
The version of TRABAHO bill that was approved by a House panel did not incorporate the Department of Finance’s proposal to make the CIT cuts conditional on revenues from removal of select tax perks. This means foregone revenues in the first year of implementation in 2021 that will not be matched by an offsetting provision.
But this will certainly have a hard time getting support from the Senators. Senate majority leader Juan Miguel Zubiri earlier said the proposed corporate tax reform has “very little support” from senators.
The rest of the tax reform packages that mainly cover property and capital income taxation is being targeted to be introduce this year by the Department of Finance.
