The head of the Duterte administration’s economic team has assured businessmen from Japan’s Kansai region that the pending second tax reform package aimed at rationalizing investors’ fiscal perks would be beneficial to both the government and the business sector.
During a recent meeting with Osaka-based Kansai Economic Federation (Kankeiren), Finance Secretary Carlos G. Dominguez told the Japanese businessmen that the second package of the Duterte administration’s tax reform program, which aims to cut the corporate income tax rate and rationalize investment incentives, would be a gamechanger that would expand, rather than curtail, opportunities for them to do business in the Philippines.
“Fiscal incentives under the tax reform program would not be removed but would instead be rationalized or improved to ensure that these are performance-based, targeted, time-bound and transparent,” he said.
Dominguez noted that the current system of fiscal incentives, despite being the longest and most generous among the Asean economies, has not attracted more investors to the Philippines, which remained among the lowest recipients of foreign direct investments in the region.
“There is no danger that we are abandoning fiscal incentives. But as I described to you, it is really necessary for us to rationalize it. I hope for your understanding and support because we certainly don’t want to hurt companies that are making a good contribution to Philippine society,” the finance chief said.
Dominguez noted that investors were more concerned about the country’s poor infrastructure, which he said the Duterte administration was already addressing through its ambitious “Build, Build, Build” infrastructure program, under which some big-ticket projects would be financed by official development assistance from Japan.
“Following the example of Japanese policies implemented in the 1950s, we are investing very heavily in infrastructure with the generous help of your taxpayers,” Dominguez said.
He also pointed out that the second tax package would slash the corporate income tax rate to as low as 20 percent from 30 percent at present—currently the highest in the Asean region.
“Rather than look at the effect of tax reform on some companies, look at the effects of tax reform on the entire economy because it is making it better. Instead of looking at the place where you might lose, look at opportunities in the larger economy,” Dominguez told the Kankeiren delegation.
The DOF quoted Kankeiren chair Masayoshi Matsumoto, who is also the chair and chief executive of Sumitomo Electric Industries Ltd., as saying that he was very satisfied with the explanation of Dominguez regarding the second tax package.