Huge inequity in P441B tax perks?

I’m curious about the admission by Undersecretary Karl Chua in the recent briefing to STAR reporters (Aug. 2, issue) that tax perks given to 3,139 firms in 2017 meant uncollected tax revenues of P441 billion; the present Corporate Income Tax (CIT) structure had allowed these firms to just pay 6 to 13 percent income tax and get away with paying equitable taxes. He termed this a “huge inequity” and “wasted incentives”.

In the first place, the incentives must have propelled these companies, mostly export-oriented I presume, to generate higher GDP for the country. Why call it wasted? And, why blame them for taking advantage of legal incentives? Why dis-incentivize such initiatives of business, whether foreign or domestic?

I don’t get the point. (By the way, Singapore’s corporate tax in comparison is 17 percent and even much lower for start-up companies to encourage them to grow and develop, walking them through gradual corporate development.)

Another point mentioned in the STAR’s news item, coming from the Undersecretary: ”This also shows that almost all of  the country’s 90,000 small and medium enterprises pay 30 percent regular rate.”

The total number of registered firms in the country was 989,166 in that year, according to him. 

But according to the World Bank 2018 IBRD report, and I quote verbatim:  “Most Philippine firms are small two-thirds of manufacturing firms and 80 percent of services firms employ less than 20 workers, not engaged in export activities (less than 10 percent of firms export)…”

If I understand the WB report, between 66 percent and 80 percent of Philippines’ total registered companies are small, that means 90,000 is not the correct number. It should be around 800,000! What we should be worried then is that most of our business firms in the country are small and undercapitalized. They need incentives to grow, develop and be competitive like the 3,139.

In short, we are not encouraging our small companies when we pull the rug under those that succeed, like the 3,139 firms. – M.K. TAN, Quezon City