Business groups on Monday expressed support to Senate President Pro Tempore Ralph Recto’s proposal that export firms would continue to use their current incentives under the Corporate Recovery and Tax Incentives for Enterprises (Create) bill.
In a joint statement, the business groups said that “export firms preferred the status quo to continue the tax provisions they had been promised over the years to attract them to locate in the Philippines.”
Create, which proposes to reduce the corporate income tax to 25 percent from the current 30 percent, also seeks to rationalize incentives currently being enjoyed by select firms especially those located in economic zones.
Recto earlier proposed that a grandfather rule should be included in the proposed law. This would allow current investors to enjoy their current incentives while the new set of incentives would be applied to future investors.
The business groups said that the current set of incentives were introduced 25 years ago.
“These provisions were introduced 25 years ago after destabilizing coups, the Pinatubo eruption, and the turnover of empty military bases at Clark and Subic when the government became serious about attracting foreign investment,” they said.
“To attract investors, after the initial income tax holiday incentive expired, a 5-percent gross income earned tax would apply. Investors were told this rate would continue indefinitely and they believed the government,” they added.
The joint statement noted that tax incentives are one of fundamental considerations for a company’s decision to continue investing in a country.
The business groups said the grandfather rule should cover all investment promotion agencies and regional operating headquarters.
They also urged the inclusion in the Senate version of the bill that registered business enterprises (RBEs) can register their expansion or renew their incentives after the transition periods provided for under Create.
According to them there is nothing in Senate Bill 1357 that explicitly states existing RBEs can register their expansion activities or renew incentives when they expire.
“To avoid confusion, we reiterate a recommendation made in our position paper to make it clear that existing RBEs can register their expansion or renew their incentives after the transition periods provided for under Create. We believe that giving the registrants the opportunity to register their expansion activities or renew their expiring incentives will further encourage foreign investment into the country and would still be in keeping with the government’s aim to make the incentives time-bound and performance-based,” the business groups said.
The joint statement was signed by the Japanese Chamber of Commerce and Industry of the Philippines, Korean Chamber of Commerce of the Philippines, Makati Business Club, Management Association of the Philippines, Philippine Association of Multinational Companies Regional Headquarters Inc., Philippine Ecozones Association, Semiconductor and Electronics Industries in the Philippines, Inc., and the US-Asean Business Council.
Asean is the Association of Southeast Asian Nations.
