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Gov’t wants business tax breaks at par with ASEAN


By Chino S. Leyco

The Department of Finance (DOF) wants the government’s income tax holidays to be on the par with its Southeast Asian neighbors in a bid to modernize the country’s incentives program and further liberalize the economy to allow the entry of more foreign investors.

In a statement, Finance Secretary Carlos G. Dominguez III said the government has to rationalize its current fiscal incentives program while working on ways to make the Philippines a more open economy for foreign direct investments (FDIs).

Finance Secretary Carlos G. Dominguez III

Finance Secretary Carlos G. Dominguez III

Dominguez said he has already tasked Finance Undersecretary Karl Kendrick Chua to compare the country’s present set of tax breaks with  those of  the  other  Association of Southeast Asian Nations (ASEAN)  member-economies .

 “We are currently doing a line-by-line comparison between ourselves and our competitors in ASEAN. Karl Chua is doing this together with some members of our staff, so that we can really compare apples to apples,” Dominguez said.

He also disclosed that the DOF is not rushing its fiscal incentives rationalization bill “because we want time to consult, to really think and check what’s going on around the ASEAN region.”

But with the limited financial government resources, Dominguez said that profitable business ventures should no longer be subsidized by the government, which should instead focus only on industries relevant to the current environment.

The new tax incentives program should address the viability gap, very targeted, and in favor of performance-based types of tax incentives, Dominguez said.

He added that there must be sunset provisions in granting tax incentives as the government cannot perpetually subsidize investment activities.

“Forty is an important number for us because some of those companies have been here for 40 years,” said Dominguez, noting that the Philippines has been unreasonably generous in providing preferential rate on taxes for enterprises.

“When you’re saying those guys [other countries] are giving tax breaks for 25 years, we’ve been at it for more than 40 years. So, I don’t think we’re really behind in providing such incentives,” Dominguez  said.

The DOF is currently drafting a bill seeking to lower corporate income tax rate to 25 percent, but at the same time, proposes the rationalization of fiscal incentives.

At a recent tax forum in Makati City, Dominguez shared a story of one company threatening to leave the Philippines should the government rationalize the incentives offered to businesses.

 “One of your companies, they said they would go to Croatia. If I remember… I said ‘fine, you can go to Croatia.’ But I asked ‘how long is the tax incentives they’re giving you?’ they said ’15 years’. I said ‘we’ve given it to you for more than 40,” Dominguez  said.

The finance chief, meanwhile, said that his department is supporting the plan to relax the constitutional restrictions on foreign ownership, except with regards land ownership, in order to attract foreign direct investments.

Dominguez explained  that  the legacy of nationalist policy on land ownership is also being implemented in advanced economies such as Singapore and China.

 “The President has said that he’s calling a constitutional convention to change the ownership rules of everything except land,” Dominguez said.

 “Foreigners ask me, ‘Oh, what do you want to buy land in the Philippines?’ I always answer ‘can you buy land in Singapore?’ No. ‘Can you buy land in China?’ No. I mean, we’re not that strange, and land is a very sensitive issue here. So I think they should also respect the sensitivities we have,” he  said.

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