Manufacturers to pay less tax under proposed fiscal scheme

MANILA, Philippines - Domestic manufacturers will only pay half of their corporate income tax (CIT) for 15 years under the proposed fiscal rationalization program of the Board of Investments (BOI) and the Department of Finance (DOF).

In an interview with reporters, BOI executive director Efren V. Leano said the DOF has agreed on the reduced CIT. Currently, the CIT is 30 percent. Under the new scheme, manufacturers that cater to the domestic market will only pay 15 percent.

Leano said that in addition to this, the BOI is pushing for a four-year income tax holiday (ITH).

“The Finance Department agreed on the 50 percent because the domestic manufacturers will suffer,” Leano said.

This is because under the proposed incentive scheme, exporters who are inside or outside the Philippine Economic Zone Authority (PEZA) will enjoy six years (ITH) plus a five percent Gross Income Earned (GIE) for 19 years. All in all, exporters will get fiscal incentives for 25 years or half of the 50 year life of a corporation.

Leano said PEZA still has not agreed on the proposal that exporters outside PEZA zones will enjoy the same privileges but both BOI and DOF have agreed to this scheme.

At the same time, Senator Ralph Recto is keen on removing all ITH. Instead, Recto would like to reduce the CIT to 15 percent for as long as the corporation is operating.

There are eight bills pending before the Congress and the Senate for the rationalization of fiscal incentives.

The bills filed by Congressman Albert Garcia, Arthur Yap and Tomas Apacible are closest to the position of the BOI. In the Senate, those that are similar to BOI position are the ones filed by Senator Manny Villar and Edgardo Angara. The DOF version is supported by Congressmen Sonny Belmonte and Gloria Arroyo. Recto has his own version of the bill.