‘Government lost P1.3 trillion in 3 years to tax exemptions’

by Jess Diaz (The Philippine Star), 19 Aug 2019

MANILA, Philippines — The government lost P1.3 trillion over three years to “unnecessary” tax exemptions and other incentives thousands of businesses are allowed “to enjoy forever,” the chairman of the House of Representatives committee on ways and means said yesterday.

“This huge amount should have gone to the national coffers,” Albay Rep. Joey Salceda said, adding that the forgone revenues totaled P343.9 billion in 2015, P433.2 billion in 2016 and P504.2 billion in 2017.

The total amount lost in just three years is already more than a third of this year’s P3.7-trillion national budget, he added.

Based on a document Salceda handed out to reporters, the bulk of foregone revenues was in the form of value added tax exemptions amounting to P630 billion over the three-year period, followed by waived income taxes totaling P334 billion.

Many of the businesses enjoying fiscal incentives are electronics makers and manufacturers located in economic zones administered by the Philippine Economic Zone Authority (PEZA), which wants its locators to continue enjoying their tax exemptions.

The Salceda committee has endorsed a bill that would rationalize tax incentives and at the same time reduce corporate income tax from 30 percent to 20 percent over five years.

Salceda said the proposed law would remove tax exemptions from businesses that have enjoyed them for too long and retain them for enterprises that are creating more jobs.

The business process outsourcing or call center industry, which employs more than one million workers, is receiving far fewer incentives than those in manufacturing, he pointed out.

He stressed that while the Philippines allows “forever” enjoyment of tax privileges, other nations in Southeast Asia have a maximum timeline of only 20 years.

Another lawmaker-economist, Rep. Mikee Romero of 1-Pacman, said the country imposes the highest corporate income tax at 30 percent among members of the Association of Southeast Asian Nations, with Singapore having the lowest at 17 percent.

He believes that the significant reduction in corporate tax “could lead to more job opportunities and income for our people.”

“It would mean that businesses would have more investible income that they could use for expansion or for starting new ventures. That in turn would mean more jobs,” Romero said.

He hopes that the bill would not result in revenue losses for the government, pointing out that “we need more revenues especially for the universal health care program that aims to cover all Filipinos under PhilHealth insurance coverage so they could enjoy free medical care.”

Last Tuesday, the House approved a bill imposing higher taxes on beer and other alcoholic drinks, and e-cigarette. The bulk of additional collections would go to the expanded health services program.

However, Finance Undersecretary Karl Kendrick Chua said projected incremental revenues amounting to P32 billion would still be short by P30 billion to fill the program’s P62-billion financing gap on its first year of implementation in 2020.