INDUSTRY groups on Monday backed Sen. Ralph Recto’s proposal to create a separate set of incentives for domestic and foreign enterprises in the proposed Corporate Recovery and Tax Incentives for Enterprises (Create) bill.
Senate Ralph Recto. file Photo
“Of the options proposed by Senator Recto, it looks like option two is getting some traction and DoF (Department of Finance) is kind of open to that although we would rather have the incentives retained for those investors meeting the performance criteria, putting a transition period puts additional investments at risks especially if operating costs are not competitive with Vietnam, Thailand and Malaysia,” said Semiconductor and Electronics Industries in the Philippines Foundation Inc. (Seipi) President Dan Lachica in a briefing.
Create seeks to reduce the corporate income tax rate from the current 30 percent to 25 percent this year, and further trim it by 1-percentage point starting in 2023 to reach 20 percent in 2027. It also seeks to rationalize incentives currently being enjoyed by select firms, especially those in economic zones.
Recto earlier laid out three options on how incentives should be rationalized.
Seipi disclosed that option one would allow five investment promotion agencies including the Philippine Economic Zone Authority (PEZA) to retain their current set of incentives; option two, meanwhile, seeks to put a distinction between domestic and export enterprises and allows the latter to enjoy some of the incentives perpetually as long as they remain as export enterprises; and option three will have a grandfather rule that will allow all existing firms to retain their incentives, with the new set will only be applicable to new investors.
American Chamber of Commerce of the Philippines Senior Advisor John Forbes also welcomed the options presented by Recto.
“He set out several options. The one that is more robust and what we understand that the DoF is willing to work with is option two so we are endorsing that option,” he said.
The Philippine Association of Multinational Companies Regional Headquarters Inc. (Pamuri), meanwhile, appealed that the industry should be given at least a four-year transition period.
“Tax incentives really matter and the best proof of that is the industry, which was hit by the removal of certain tax incentives when Train 1 ( Tax Reform for Acceleration Inclusion) was passed. We appeal to Congress and DoF to consider competitiveness especially at this time of pandemic that many countries are scrambling for the investments to flow into their countries,” said Pamuri member Mimi Malvar.