Foreign businessmen warned that the proposed rationalization of tax incentives would result in the loss of over 700,000 jobs.
The American Chamber of Commerce of the Philippines (AmCham) said the passage of the Corporate Income Tax and Incentive Rationalization Act (CITIRA) would displace hundreds of thousands of Filipinos working in industries that enjoy tax incentives.
“The Philippines is at risk of losing about 700,000 jobs if CITIRA bill will be passed,” said AmCham senior advisor John Forbes at the maiden hearing of the Senate Committee on Ways and Means.
The CITIRA bill aims to cut the corporate income tax from 30 percent to 20 percent by 2029 . It also intends to remove redundant fiscal incentives that are being enjoyed by certain sectors such as the manufacturing and information technology–business process outsourcing (IT-BPO) companies.
Finance Undersecretary Karl Chua said the government loses about P441 billion in forgone revenues because of these incentives, of which P345 billion was granted to firms registered with the Philippine Econominc Zone Authority (PEZA).
PEZA argued it has brought in at least P3.7 trillion worth of investments from 1995 to 2016, aside from generating around 1.5 million direct employment and 7.5 million indirect employment to Filipinos.
According to PEZA, CITIRA is ideal only for domestic enterprises and not for export-oriented industries.
Finance Secretary Carlos Dominguez III said the proposed CITIRA would boost MSME growth because under the current corporate taxation system, a select group of 3,150 corporations registered under investment promotion agencies (IPAs) enjoy discounted effective corporate income tax rates of 6 to 13 percent while small and medium-sized businesses, which employ a majority of Filipino workers, pay the regular tax rate of 30 percent, which is the highest in the region.