Bernadette D. Nicolas | BusinessMirror | September 23, 2019
The chairman of the House Committee on Ways and Means scored information technology and business-process management (IT-BPM) firms for claiming that their taxes will go up “dramatically” if a bill rationalizing fiscal incentives is enacted.</p
Albay Rep. Joey Sarte Salceda, the panel chairman and lead author of Corporate Income Tax and Incentives Rationalization Act (Citira) bill, also challenged IT-BPM firms to show him their figures.
“I told them, ipapaputol ko ang daliri ko kung may isang piso na malugi sa inyo [I told them, I will have my finger cut if you will lose even a peso],” Salceda told reporters in a recent news briefing held in Malacañang.
The lawmaker issued the statement after IT and Business Process Association of the Philippines (Ibpap) President Rey E. Untal said the cost of doing operations in the country will rise “dramatically” if firms are forced to relinquish their fiscal incentives.
Salceda also said the resistance of Citira critics is not “numbers-based and data-based.”
“That is an ideological resistance because they haven’t read the bill passed by Congress,” he said.
Locators will need to give up their incentives, including the 5-percent tax on gross income earned (GIE), if the Citira bill is applied to them. Under the proposal, they are given between two years and five years to surrender their tax perks and to eventually shift to paying corporate income tax (CIT).
Currently, economic zone firms are allowed to enjoy income tax holiday for up to six years for pioneer activities and four years for non-pioneer activities. Upon the expiry of their ITH, they will perpetually pay 5-percent tax on GIE, be exempted from all local and national taxes, enjoy duty-free importation of raw materials, capital gear and spare parts, among others.
Although the Citira bill will reduce CIT to make the Philippines more competitive, the rate of this tax is still higher compared to the GIE.
Under the Citira bill, the CIT rate of 30 percent will be reduced to 28 percent in 2021; to 26 percent in 2023; to 24 percent in 2025; to 22 percent in 2027; and to 20 percent in 2029, as part of government efforts to attract more investments to the Philippines. Essentially, if locators give up their tax perks and shift to paying CIT, they will pay 28 percent right away in 2021.
The Ibpap has also expressed concern that the industry will struggle to grow by 8 percent this year as firms are having difficulties expanding their operations due to the ban on economic zone development in Metro Manila.
President Duterte signed Administrative Order 18 in June, which mandated a moratorium on the processing of new applications for economic zones in the National Capital Region. Thus, the Philippine Economic Zone Authority was directed to no longer accept, process, or evaluate proposals to put up new economic zones in NCR, resulting in an office space crunch for the IT-BPM industry.
Finance Undersecretary Karl Kendrick Chua said this can be addressed by expanding their operations outside Metro Manila.
“The NCR is already very congested. There is a need to create jobs outside NCR, in the adjacent provinces and in other regions,” Chua told the BusinessMirror.
He also noted that the ban was only for new economic zones so IT-BPM firms may invest in existing ecozones in Metro Manila.
When asked whether the tight competition for office space in Metro Manila was due to Philippine Offshore Gaming Operators (Pogos), Chua said: “Well space is limited everywhere.”
Untal said available office space in Metro Manila is down to 115,000 to 120,000 square meters due to the influx of Pogos.
Last year, the IT-BPM industry expanded 420,000 sq m. This year, it requires 450,000 sq m to accommodate expansions and new operations.
With a labor force of 1.23 million workers as of last year, the industry accounts for at least 32 percent of office spaces in the Philippines.
Under its road map, the industry is projected to create 100,000 jobs annually to employ a total of 1.8 million workers by 2022.
Source: https://businessmirror.com.ph/2019/09/23/resistance-to-citira-not-data-driven-salceda/