DOF: No job losses, inflationary impact under tax reform II

The Department of Finance (DOF) said Wednesday the second package of the government's comprehensive tax reform program, which aims to lower corporate income taxes but rationalize fiscal incentives, will not result in job losses and further spike in consumer prices.

Early this month, the House Committee on Ways and Means approved the second package of the tax reform law, dubbed as the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO), during a hearing. 

The approved version seeks to gradually lower corporate income tax (CIT) rates to 20 percent from 30 percent, or by 2 percent annually starting 2021.

The bill carried the DOF's proposal to rationalize and consolidate fiscal incentives and make it "performance-based, targeted, time-bound, and transparent."

"Wala pong minimal job loss because we are going to help firms that are necessary," Finance Undersecretary Karl Kendrick Chua said in a press briefing in Malacañang.

The Finance official said under the second package of the tax reform program, fiscal incentives will be retained for "necessary" firms that will be identified under the strategic investment priority which will be completed next year while those enjoying "unnecessary" incentives will be removed.

"'Yung mga necessary incentives we will continue to have them so wala po kaming nakikitang job losses. Yung unnecessary incentives na matatanggalan gradually, the reason why they are called unnecessary is in our opinion they will continue to invest because they are inherently profitable," Chua said.

"Also, the lowering of corporate income tax will create a lot of opportunity for expansion and job creation so we do not see any job loss," he added.

However, the Finance official said that the TRABAHO bill provides a P500-million annual "Structural Adjustment Fund" for five years.

"The fund is precautionary para sure just in case... may handa pong tulong na hindi na aantayin ang mahabang proseso ng pag-budget," Chua said.

The Finance official also assured that the second tax reform package will have no inflationary impact.

"The DOF version is revenue neutral tapos 'yung TRABAHO bill initially may revenue loss... so 'yung inflationary impact talagang wala. Kung meron man, baka sa ibang dahilan," Chua said.

"Ang ginawa ng TRABAHO bill is they retained the special incentives of food, agriculture, telecommunications 'yung mga sensitive sectors so talagang walang inflationary effect," he added.

The first package of the tax reform called Tax Reform for Acceleration and Inclusion (TRAIN) was widely blamed for the continuous spike in inflation, which compelled the Bangko Sentral ng Pilipinas to raise key policy rates thrice so far this  year.

For his part, Finance Assistant Secretary Tony Lambino said the companies mostly enjoying incentives are exporters, so if they decide to hike their prices due to potential revenue lost from removed incentives, it won't affect domestic prices.

"Kung tataas man ang presyo nila doon sa export market nila," Lambino said. 

Citing DOF's data, Chua said in 2016 alone around P179 billion in foregone revenue were incurred by the government from 3,102 companies enjoying tax incentives, 645 of which are enjoying it for more than 15 years.

He said that the majority of registered businesses are micro, small, and medium enterprises that will benefit from the second tax reform package, citing that in 2015 90,000 SMEs paid the regular 30 percent corporate income tax, while 2,844 firms granted incentives paid 6 to 134 percent in income taxes. —KG/BM, GMA News