Visayas and Luzon SMEs back lower

corporate income tax, EODB reforms

Small and medium enterprises (SMEs) from Visayas and Luzon have rallied behind the Duterte Administration’s proposed reforms in corporate taxation, which, they said, would enable them to expand their businesses, raise their employees’ salaries and hire more workers.

Edward Du and Alexander Ang, regional governors of the Philippine Chamber of Commerce and Industry (PCCI) for Regions VII and I, respectively, said the savings from lowering the corporate income tax (CIT)–as proposed under the second package of the Duterte Administration’s comprehensive tax reform program (CTRP)—would allow businesses, especially SMEs, to not only hire more workers but to even increase wages.

Du and Ang, representing the business community from Central Visayas and Luzon, submitted the sector’s recommendations on how the government could further strengthen investor confidence in the economy, during recent regional Sulong Pilipinas consultative workshops in Cebu City and San Fernando, La Union.

They said the SME community is also backing reforms to further improve the ease of doing business (EODB), especially the zero-contact policy provided under the EODB law, which “will create the most significant positive impact.”

“With regard to the TRABAHO bill (Tax Reform for Attracting Better and High-Quality Opportunities), we support the lowering of corporate income taxes. Savings from lower corporate income taxes will allow us to hire more workers, increase wages and expand our businesses,” Du said.

The Sulong Pilipinas workshop, held annually and organized by an inter-agency and multisectoral committee convened by the Department of Finance (DOF), aims to gather the inputs and recommendations of the business sector on how the government could further improve the investment climate and fulfill its goal of high and inclusive growth.

The workshop has evolved this year into a series of forums held in each of the country’s major regions. A Sulong forum was held last Nov. 9 in Cebu City and Nov. 14 in San Fernando, La Union, while two others are scheduled soon in Davao City and the Clark Freeport in Pampanga.

During the Sulong-Cebu forum, Du cited as the Central Visayas business sector’s top recommendation “the need to increase agricultural output through better access and improved public investment in new farm technology.”

Among the inputs from the business sector cited by Du were for the Department of Agriculture and the Bureau of Fisheries and Aquatic Resources to ramp up their research and development efforts, as well as for the government to “prioritize transforming the agriculture sector into a net exporter of high-valued crops.”

Du also cited, as the business sector’s recommendation, the “improvement of farmer’s income through support services and assistance.” These include financial assistance, subsidies and credit facilities for farmers, mechanisms for farmer participation in policy-making, farmer training and techniques, improved access to cheap farming inputs and irrigation systems, and more post-harvest facilities and marketing venues.

In the Sulong-La Union forum, the top ten recommendations also included suggestions for agriculture. Ang stated, as Luzon business sector’s recommendation, “[for the government to] improve the efficiency of the local farming industry by investing in education and new technology.”

Other recommendations from Sulong Cebu include the need to implement efficient mass transport systems to ease traffic congestion; simplify loan requirements and offer low interest rates, especially for SMEs; speed up processing by the Food and Drug Administration of licenses and certificates of product registration; allow the filing and paying of taxes by SMEs online; and streamline government processes and reduce red tape.

In Sulong-La Union, the business sector also cited the need to build seaports, airports, and mass transit systems to improve access and mobility; provide more funding for health care; and ensure that infrastructure projects comply to existing standards.

Some 90,000 active SMEs and more than a hundred thousand micro enterprises that pay the current regular CIT rate of 30 percent, which is the highest in the region, stand to benefit from Package 2 of the CTRP.

Besides proposing to lower the CIT rate to make it at par with the regional average, the DOF is also pushing the congressional approval of CTRP Package 2 to rationalize incentives for businesses, because under the now-convoluted system, a select group of mostly big firms enjoy tax breaks plus other perks that let them pay discounted rates of between 6 and 13 percent, while the rest pay the regular rate of 30 percent.

These favored firms–many of them on the elite list of Top 1,000 Corporations–that enjoy tax holidays and other incentives are registered with any of the country’s 14 investment promotion agencies (IPAs). Most other countries only have one or two IPAs under their respective finance ministries governing tax incentives.

The government has incurred P344 billion in foregone revenues in 2015 because of the tax perks given to favored firms on the strength of 136 laws.

The House of Representatives has approved its version of Package 2, dubbed the TRABAHO bill last September. The Senate is still discussing in its ways and means committee its version filed by Senate President Vicente Sotto III and called the Corporate Income Tax and Incentives Reform Act.

Finance Secretary Carlos Dominguez III has said the new “targeted, time-bound, performance-based and transparent” set of incentives under Package 2 will include perks such as more tax deductions for firms hiring more workers, and longer tax holidays for those that would set up shop in areas outside Metro Manila, especially in post-conflict and post-calamity areas.

Moreover, Package 2 will allow additional tax deductions in incremental spending on labor, research and development (R&D), reinvestment in manufacturing, and domestic input expense, among other factors.

This year’s series of ‘Sulong’ regional workshops are jointly organized by the DOF and the Presidential Communications Operations Office (PCOO), along with the Departments of Public Works and Highways (DPWH), Trade and Industry (DTI), Transportation (DOTr), Budget and Management (DBM); the National Economic and Development Authority (NEDA); Bangko Sentral ng Pilipinas (BSP); Bases Conversion and Development Authority (BCDA); and Philippine Chamber of Commerce and Industry (PCCI).

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