DOF assures TRAIN 2 will not nix incentives

CEBU, Philippines — Modernization of investor incentives and other economic boosting policies are just among the changes that the package 2 of the Tax Reform for Acceleration and Inclusion (TRAIN 2) will bring in once it will be passed into law.

This was the assurance made by Department of Finance (DOF) director Euvimil Nina Asuncion to the Cebu business community amid the impression that the second tranche of the tax reform will threaten the fiscal incentives given to businesses.

"We are not taking away incentives but we are modernizing them," Asuncion told the Cebuano business sector explaining further that the next batch of tax reforms is proposed so that the Philippines could have a thriving and responsive economic environment.

TRAIN 2 seeks to rationalize fiscal incentives and reduce corporate income tax rates gradually to no less than 25 percent from 30 percent.

Asuncion assured businesses that the proposal is not going to scrap incentives, contrary to the general impression. Instead, the legislation is meant to make policies more responsive, effective and relevant to this modern environment.

Already submitted to the House of Representative early this year, the TRAIN 2 package will introduce a modified tax incentives for companies to make these ‘performance-based, targeted, time-bound, and transparent, she further explained.

Thereby, incentives granted to businesses that generate jobs, stimulate the economy in the countryside and promote research and development; contain sunset provisions so that tax perks do not last forever; and are reported so the government can determine the magnitude of their costs and benefits to the economy.

Under this modernized fiscal laws, incentives enjoyed by big companies like income tax holidays and other perks with no time limit have to be corrected.

The government is giving out more than P300 billion to companies in form of incentives per year.

But with the tax reform laws, DOF expects to generate P786.4 billion in additional revenues in five years and this can be used to fund programs related to promoting investments.

It is high time therefore that the government is going to review the relevance of giving this amount as incentives.

While tax incentives are privileges, Asuncion reminded businessmen that the government also has the right to take them away (if necessary).

The TRAIN 2 package complements the recently-implemented first package of the tax reform program, which is aimed at gradually reducing and eliminating poverty as well as to promote equality.