Former top officials of the Department of Finance are backing the second tax reform package aimed at reducing corporate income tax rates while rationalizing the fiscal perks being enjoyed by investors.
Last Friday, 10 former secretaries and undersecretaries of the DOF told Finance Secretary Carlos G. Dominguez III that they supported the comprehensive tax reform program “and strongly encourage the government to urgently pursue the tax reform’s second package, aimed at modernizing the fiscal incentives regime.”
“We continue to share the country’s goal of becoming a prosperous, predominantly middle-class society. Achieving this will require an equitable tax system and robust public investment, which the first package of reforms began to address,” the former DOF officials said in a statement.
The statement was signed by former Finance secretaries Margarito B. Teves, Roberto F. de Ocampo, Alberto G. Romulo, Salvador M. Enriquez, Jose T. Pardo, Jose Isidro N. Camacho and Cesar V. Purisima.
Also signatories to the statement were former Finance undersecretaries Romeo L. Bernardo, Lily K. Gruba and Cornelio C. Gison.
For the former finance officials, “tax policy must enable a fair, competitive, and growing business sector.”
“Standard corporate rates must be reasonable, to encourage compliance, broaden the tax base, unburden small and medium enterprises, and create strong domestic value chains. At the same time, fiscal incentives must be treated as public investment: the economic benefits must outweigh the costs in foregone revenue; and the tax incentive regime must align with the country’s socioeconomic priorities,” they said.
As such, they said that “the fiscal incentives regime, made complex and costly by years of neglect and abuse, needs modernization, so that incentives are more transparent, performance-based, targeted and time-bound.”
“Modernizing the fiscal incentives regime will spur countryside development and public investment by incentivizing investment in less developed areas and releasing local governments from a system that allowed registered enterprises to pay preferential rates in lieu of all taxes, including local taxes,” they added.
Also, the former DOF officials back up the proposed amendments to the Tax Incentives Management and Transparency Act, the consolidation of tax incentives into a single menu, as well as empowering the Fiscal Incentives Review Board to be chaired by the Secretary of Finance in the grant of fiscal perks.
“We also believe that the corporate income tax regime, burdened by the highest standard rate among Asean countries, at 30 percent, is in urgent need of reform. We strongly support the reduction of corporate income tax alongside the rationalization of tax incentives. Coupled with measures to simplify the tax system and improve tax compliance, reforms in the corporate income tax regime will make the system simpler, fairer, and more efficient,” they said.
“We see that the proposal of the DOF is fair and well-crafted as it encourages equitable and inclusive growth, a competitive business environment, and strong countryside development. We therefore express our strong support for package two and urge members of Congress to ensure its timely package,” they added.