Gov’t allays private sector fears on tax perks removal

Incentives are not among the most pressing concerns of prospective investors looking at pouring money into the Philippines such that the planned cut in fiscal and other perks under the second tax reform package is crucial to level the playing field, the Department of Finance said.

Reacting to claims by some business and industry groups as well as investment promotion agencies that the rationalization of tax incentives being enjoyed by investors would drive away present and future investments, Finance Undersecretary Karl Kendrick T. Chua said that investors themselves had cited “four more important and pressing concerns than tax perks that they want the Philippines to address for them to bring in more investments, which are the infrastructure gap, inefficiency in government, corruption, and the high cost of doing business here, as shown by the results of the 2017 World Economic Forum survey.”

Tax rates and incentives only ranked fifth among the concerns raised by investors in this survey, Chua said.

Chua clarified that far from removing all fiscal incentives for businesses, the Duterte administration merely wanted to harmonize and modernize such perks to ensure that these are targeted, time bound, transparent and performance-based.

“That the government will put ‘a stop to current incentives’ is a misconception. This is simply not true. Incentives will remain to be granted, but more judiciously this time so that there is a better balance between the investment and fiscal sustainability goals,” Chua said, adding that the DOF recognized the role of incentives to encourage investments.

Chua said that the government only wanted to “level the playing field of business and make our system equitable, transparent and more accountable by, among others, removing perpetual tax holidays enjoyed by only a select group of investors, which is unfair especially to smaller enterprises that pay regular tax rates.”

Rather than provide incentives in perpetuity to only a select set of industries without any accountability, the government must address the more urgent concerns of modernizing infrastructure and investing in education and health to give all businesses a level playing field, he said.

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