Favored firms got P86b in income tax perks, declared P142b in dividends in 2015: DOF
October 18, 2018
The Department of Finance (DOF) said in 2015 , the government gave away P86.3 billion-worth of income tax incentives to firms that paid out a total of P141.8 billion combined in dividends to their respective shareholders, a statement from the department said Thursday.
Finance Undersecretary Karl Kendrick Chua said data from the Securities and Exchange Commission (SEC) and those reported by investment promotion agencies (IPAs) as mandated under the Tax Incentives Management and Transparency Act (TIMTA) show that these declared dividends were 164 percent of the income tax incentives received by firms from various sectors.
Such data showing certain enterprises declared dividends that are way above the incentives they receive from the government prove many are inherently profitable and no longer need such perks for their businesses to prosper here in the Philippines, Chua said.
While about 90,000 small and medium-scale enterprises (SMEs) in the country pay the regular corporate income tax (CIT) rate of 30 percent, the highest in the region, and some of the hundreds of thousands of micro-enterprises pay the higher corporate or personal income tax rate, favored and highly profitable firms in the manufacturing sector that had received a total of P37.3 billion in income tax incentives handed out P63.9 billion in dividends to their shareholders in 2015 alone.
This system for SMEs continued in the services sector, which received P31 billion in income tax incentives but paid out P47 billion in dividends to their shareholders during the same period.
A total of P16.6 billion of income tax incentives were granted to the non-manufacturing sector, which declared P30.5 billion in dividends. In the agriculture sector, companies received P500 million of such incentives and paid out P400 million in dividends, while an unspecified number of firms that reported no dividends were given income tax incentives amounting to P900 million.
"This means that while SMEs, which employ about 65 percent of Filipino workers in the country, have to pay the steep CIT of 30 percent, the favored big corporations get sizeable tax breaks that enable them to award huge dividends to their stockholders," Chua said. "Filipino taxpayers are, in effect, subsidizing a lion's share of the profits earned by a select group of corporations that enjoy already redundant incentives under our convoluted CIT system."
Earlier, the DOF identified a total of 645 registered enterprises that continue to receive tax incentives even after 15 years in the business, proving that investment perks given usually to big or multinational firms--many of them are "inherently profitable"--have become redundant and unnecessary.
The DOF is pushing the approval in the Congress of reforms that seek to lower the CIT rate and reorient the complicated fiscal incentives system under Package 2 of the Duterte administration’s comprehensive tax reform program.
Last Sept. 10, the House of Representatives passed its version of Package 2—the Tax Reform for Attracting Better and Higher-quality Opportunities (Trabaho) bill. The Senate is still deliberating at the committee level its version of the measure, which was filed by Senate President Vicente Sotto III and dubbed the Corporate Income Tax and Incentives Reform Act." DMS
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