MANILA, Philippines–The finance department is amenable to cutting the taxes on companies’ profits as new revenue sources are being considered.
When asked about the proposal to bring down the corporate income tax rate to 25 percent from 30 percent at present, Finance Undersecretary Gil S. Beltran said that “[a] comprehensive tax reform is being put together to allow us to cut [that] rate.”
Without disclosing details, Beltran said the comprehensive tax reform proposal of the Department of Finance (DOF) would likely raise the taxes slapped on goods or services that currently are tax-exempt or have “very low” rates in order “to be fair.”
The DOF is looking at jacking up the excise tax on petroleum, alongside other potential taxes on consumption and wealth.
For her part, Commissioner Kim S. Jacinto-Henares of the Bureau of Internal Revenue (BIR) said in a text message that her agency would support the proposal “only if there is a proposal to generate revenue that will cover for whatever revenue loss that will result from it.”
According to the website of the European Chamber of Commerce of the Philippines, Trade Secretary Gregory L. Domingo told European businessmen in a meeting last Feb. 10 that the government was looking at reducing corporate income taxation “to keep the Philippines competitive.”
Amid parallel moves by legislators to adjust income tax brackets as well as slash rates, economic managers have warned that lower collections might impact negatively on the economy.
“We just hope that [revenue] erosion will not continue on with more populist bills being passed in Congress,” Budget Secretary Florencio B. Abad told reporters last Tuesday.
Abad said the government would review its 2015 revenue targets as higher tax-exemption caps coupled with cheaper oil would likely drag down this year’s take.
Separately, Finance Secretary Cesar V. Purisima said “populist” tax policies should be avoided to sustain economic growth.
“If we continue to reduce taxes, yes you will have more money in your wallet. But inflation and interest rates will go up, and the peso will depreciate. So what you save in taxes will not compare to [the value of money] you have,” Purisima said during the BIR’s 2015 tax campaign kickoff for the agency’s large taxpayers service also on Tuesday.
“Especially in this very political season, they [politicians] will attract you by being populist,” Purisima said.
For Abad, fiscal responsibility should be maintained. “Even if we reduce the tax burden, we should not reduce revenues to not erode our fiscal position.”