MYTH #1: Package 2 will be inflationary.
No. Package 2 will lower the corporate income tax rate from 30% to 20%. Moreover, in the House bill, incentives of inflation-sensitive sectors such as agriculture, energy, and telecoms are retained. These will ease the pressure for firms to increase prices.
MYTH #2: Package 2 will result in massive job losses.
Package 2 will lower the corporate income tax rate. This will incentivize firms to create jobs.
Package 2 will provide performance-based incentives to firms that really need them. This will promote the creation of jobs.
Package 2 will remove unnecessary incentives. Even without incentives, these firms will largely continue to operate and retain jobs because there is a profitable market or factors of production are abundant to warrant strong business growth.
In summary, with lower taxes and performance-based incentives, firms are incentivized to expand and create high-value and better-paying jobs. Additional deductions for labor and R&D are examples of performance-based incentives that aim to promote employment and capacity-building.
MYTH #3: Package 2 will cause uncertainties.
For many firms, uncertainties are caused by prolonged delays in the passage of this new incentives system as investors prefer to wait and see before committing the investment. But once the reform is enacted, investors can invest with certainty.
As one major investor says: “tax rates can change and we will adjust, and the productive firms can still make money.”
MYTH #4: Package 2 will impose new taxes.
Package 2 does not raise any new taxes. In fact, it lowers the corporate income tax rate and makes the grant of incentives fairer and more accountable.
MYTH #5: Package 2 will make tax incentives less competitive.
Package 2 provides even more competitive and performance-based incentives such as additional deductions for labor, training, R&D, infrastructure, depreciation, NOLCO, and so on. These additional options are available to qualified activities that are not present in the current incentives system. All these can incentivize good job creation.
Moreover, firms can continue to avail of incentives every 5 or 7 years so long as they qualify and innovate.
MYTH #6: Package 2 will violate sanctity of contracts.
Package 2 follows the country’s tax policy, which is determined by Congress. It is the inherent power of the State to tax. It is the responsibility of all taxpayers to pay taxes.
Incentives are not entitlements, but privileges that must be earned. When firms apply for incentives, they do so under the prevailing incentive structure, which can be changed by Congress.
If tax incentives, can never be changed, then it is telling Congress it has no power to change tax policy.
MYTH #7: Package 2 will expose investors to unnecessary red-tape and harassment.
Package 2 does not remove the one-stop-shop function of IPAs, such as PEZA and BOI. They will continue to promote and facilitate trade and investment and ensure ease of doing business in relation to investors’ transactions with various government agencies. Local business tax is still part of the incentive package while real property tax is largely paid by developers that do not receive incentives.
MYTH #8: Package 2 will create an added layer of bureaucracy with the FIRB.
FIRB will follow the requirements of the law, particularly the recently-passed Ease of Doing Business Law that mandates standards for processing time. So long as IPA adhere to the policy, approval of FIRB is quick.
MYTH #9: Package 2 will scare investors away.
Package 2 offers competitive incentives, such as additional deductions, that can attract firms, help them grow, and create more and better jobs. Only firms that take advantage of the current system might be scared off.
Package 2 helps ensure that tax incentives are reoriented toward the strategic growth industries of the future.
MYTH #10: Package 2 will impose tax on the sale of books.
The sale and importation of books remain exempt from VAT and customs duties. These are provided under the Florence Agreement and amplified in the Tax Code and the Customs Modernization and Tariff Act.
Section 12 of RA 8047 or the Book Publishing Industry Development Act is being repealed in line with the general policy of rationalizing fiscal incentives towards a more targeted, transparent, time-bound, and performance-based incentives system. If included in the Strategic Investment Priority Plan (SIPP), local publishers of books may enjoy more incentives than what is provided in RA 8047.
MYTH #11: Package 2 will raise the tax for educational institutions and hospitals.
The House Bill No. 8083 does not change the taxation of education and health institutions. The Senate bill proposes that incentives of any industry, including educational institutions and hospitals, be provided if the industry qualifies in the SIPP.
MYTH #12: Package 2 will impose tax on micro-businesses.
Package 2 will harmonize the tax incentive provisions of all laws that grant tax incentives and merge them into the Tax Code and the SIPP. This is to simplify the currently complicated regime that has 136 investment-related and 200 non-investment incentive laws that provide various tax incentives.
