By Bernie Cahiles-Magkilat
European businessmen yesterday called on government to be bolder by immediately reducing the corporate income tax (CIT) to 20 percent from the current 30 percent to attract more investors into the country even as they forecast a cautious optimism that 2019 would be a better year for the Philippine economy.
“2019 has all the ingredients for success. Cautious optimism should prevail so we should continue to cultivate good relationship between EU and the Philippines. There is good reason to work as partners,” said Nabil Francis, president of the European Chamber of Commerce of the Philippines (ECCP).
Francis cited all the positive factors to support sustained growth this year, particularly the massive infrastructure projects of the Duterte administration, the slowing down in inflation rates, and a resilient GDP growth.
He also cited the Trabaho Bill, the second tranche of the government’s comprehensive tax reform program, which seeks to reduce the corporate income tax from 30 percent to 20 percent over time and at the same time overhaul the country’s incentive system to investors.
According to Francis, European investors support the Trabaho Bill but they have two worrisome concerns: the long sequence in corporate income tax reduction and overhaul in the tax incentive system.
ECCP believes that the proposed sequence in the CIT reduction is taking a longer time before the rate reaches 20 percent.
“Accelerate the reduction of the CIT to boost the economy,” said Francis, noting that at 30 percent the Philippines has one of the highest if not the highest CIT in the region.
“We are doing very good things here,” he said but noted that other countries are also working hard “so it is important to be ahead of the curb.”
Hence, the need to reduce CIT to 20 percent as “quickly as possible” as he called for the shortest reduction period. Francis also hinted of EU FDIs improving this year with incentive pledges in the pipeline.
On incentives, Francis noted that based on their survey, European firms are worried over plans to remove some of the tax perks and stressed the importance to maintain the current incentive regime to ensure a prosperous economy.
He also said that maintaining the current incentives regime is important to provide continuity in government policies.
Florian Gottein, ECCP Executive Director, stressed that need for incentives for an “imperfect economy.” Even the more developed economies of Singapore and Malaysia with their efficient infrastructure still dangle tax incentives to investors, he pointed out.
During this time of a trade war between the US and China when some companies are moving out of China and into the ASEAN countries, Gottein said, the Philippines should be able to attract these investments using its current incentive packages.
The Philippines only got a small 3 percent share of total EU investments in ASEAN. The $10 billion foreign direct investment level in the Philippines is even less than 5 percent of the country’s 6-7 percent GDP.