Package 2 of the Comprehensive Tax Reform Program (CTRP) will overhaul the government’s incentives system and make the Philippines more competitive, a Cabinet official said.
Trade Secretary Ramon Lopez, in a text message to reporters, said that a proposal currently being considered by Congress would “rationalize incentives to make it time-bound, more performance based, relevant and focused on strategic sectors.”
Package 2, which seeks to lower corporate income taxes from the current 30 percent to 25 percent and rationalize incentives given to businesses, was submitted by the Finance department to the House of Representatives last January.
The department claimed that the current system was costing the government some P300 billion annually in foregone revenues.
“The provisions in the draft tax reform Package 2 included DTI-BOI (Department of Trade and Industry-Board of Investments) inputs that makes incentives more relevant, even removes the bias against foreign investors and between export and domestic market orientation,” Lopez said.
Income tax holidays will not be removed, he added, while “more incentives are now being considered such as double deduction on research and development, accelerated depreciation and net operating loss carryover.”
“ We must benchmark our incentives to make them more competitive compared to other Asean countries,” Lopez said.
What needs to be addressed, he said, is the cost from perpetual incentives and enriching the quality and relevance of incentives.
“As we rationalize, it is unfortunate that there will be companies or individuals that will be hit, but this is exactly the necessary corrections [needed]to spread more evenly the gains and remove the years of biases and make incentives more strategic.”