Contradicting the Philippine Economic Zone Authority’s (peza) claims that the proposed second tax reform package would invalidate existing government contracts with investors, the Department of Finance insists “deserving” businesses will continue to enjoy fiscal perks under the new corporate income tax regime.
In a statement issued on Monday, Finance Assistant Secretary and spokesperson Paola Alvarez said the second tax package “seeks to lower the corporate income tax paid by some 95 percent of businesses, while at the same time retaining and providing new fiscal incentives for deserving recipients that will contribute to national development and help generate propoor investments and jobs.”
Alvarez said reports claiming that tax perks would be removed were “erroneous.”
Last week, Peza said the tax package would go against a constitutional provision that protected existing government contracts. The agency said the second tax package would scrap the tax incentives already cast in stone via those enforceable contracts.
The second tax reform package is currently pending at the House of Representatives.
Under House Bill 7458, companies that benefit from the current tax perks could keep these incentives within a transition period of no less than five years.
Finance Undersecretary for legal affairs Bayani H. Agabin argued the firms could not invoke this protection under the Constitution since “there are no vested rights in tax incentives.”
Being a statutory privilege, or a limited privilege, the incentives “may be modified or withdrawn at the will of the granting authority. In this case, that granting authority is the Philippine Congress,” Agabin added.
Alvarez also debunked Peza’s claims that the tax incentives it shelled out to the registered firms amounted to only P40 billion in 2015, or almost six times smaller than the DOF’s estimates.
“Based on the requirements under Republic Act No. 10708 or the Tax Incentives Management and Transparency Act (Timta Law), the DOF estimates incentives granted to registered enterprises in Peza zones reached P235.3 billion in 2015 alone, out of a total of P301 billion, which includes the incentives for 13 other [investment promotion agencies or IPAs],” Alvarez said.
She said the figures did not just come out of thin air, having been validated by several government agencies.
For Alvarez, “those who create good jobs, bring development to poorer areas of the country, and invest in research and development have nothing to fear, but the spread of misinformation and false claims have led to confusion.”
“These good corporate citizens certainly deserve performance-based and targeted incentives, as a reward for taking risks that others don’t for the good of the country. The government will give support to propoor and sometimes riskier investments for a reasonable amount of time, after which support can be directed to new players … ” she added.