Let's not tinker around too much with something that is not broken - Gordon

As the debate on rationalizing incentives given by investment promotion agencies continues, side by side with the proposed reduction of corporate income taxes, Senator Richard J. Gordon on Tuesday called for caution in tinkering around with something that is not broken.

Interjecting during the period for interpellation for Senate Bill No. 1357 or the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE, Gordon said they could reduce the corporate income tax rate but should take a step back on rocking the boat by changing the incentives, especially with the COVID-19 pandemic making the prospects dimmer.

"It may not be the right time to do this. Let us take a step back and look at our situation because COVID is going to exacerbate it. Let us not tinker around too much with what is working because we might end up in a bigger abyss. Why don't we bring down corporate tax then we go slowly but surely upon the impact on moving tax incentives and putting them in a very complicated process of incentivizing," he said.

SBN 1357 aims to improve the equity and efficiency of the corporate tax system by lowering the rate, widening the tax base, and reducing tax distortions and leakages. It also provides for amended categories of incentives for IPAs.

In the ASEAN region, the Philippines has the highest corporate income tax at 30 percent, followed by Indonesia with 25 percent, Thailand with 23 percent; Vietnam w ith 22 percent and Cambodia with 20 percent. Singapore levies the lowest rate of 17 percent and attracts the most foreign direct investments. The Philippines, with its highest tax rate, remains one of the lowest recipients of FDI inflows in the region.

The senator expressed concern that rationalizing the incentives given by the IPA's, which include the economic zones and Freeports like Subic and Bataan, would deter the entry of investments into the country and prompt investors who are already here to transfer their investments.

"The investments have really gone so well. All these things resulted in a multiplier effect of jobs, buying power at the same time VAT, at the same time income taxes, and this created housing demand. We don't have a better mouse trap. It really is not just the incentive that is the problem. The problem is that we are not serious, we are not really looking at who will really manage their operation well so that we can finally modernize the country," he said.

Gordon noted that with other ASEAN countries already getting investments going out of China, such as the recent announcement of Indonesian President Joko Widodo that they have gotten $830-billion worth of investments, the Philippines could not afford to wait for the end of the COVID pandemic before making a move to attract FDIs.

"We must start putting in the incentives, putting in the attractions, putting the industrial parks that we need to do or the investments that we need to do, so when they come here hindi ingu-nguso ng mga tao kung saan ilalagay at wala pang infrastructure within the zone. Indonesia also got Japanese electronic firms. Consider the fact that Indonesia is almost eight hours away from Japan and Philippines is three and a half hours away from Japan. Natutulog tayo sa pansitan, naiiwanan tayo," he stressed.