Remember the movie “Train to Busan”? The movie starts off with the protagonist and a handful of characters trying to escape a zombie apocalypse by boarding a train that would hopefully lead them into a place called “Busan”, a safe zone which has effectively cordoned off the flesh-eating zombies. The movie ends on a tragic note, (spoiler alert!) as the protagonist himself turns into a zombie, and only a few characters make it to Busan unscathed.
On the subject of trains, there is a train, which, depending on the perspective, will either save our country from the current economic crisis, or will further aggravate the worsening economic conditions.
Just a few days ago (September 10), the House of Representatives approved on third and final reading House Bill (HB) No. 8083, the second phase of Republic Act (RA) No. 10963, or the “Tax Reform for Acceleration and Inclusion” (TRAIN) Law. The first phase of RA No. 10963, Train 1, provided for new reduced income tax rates for individuals, but at the same time, also imposed new excise taxes on diesel, liquefied petroleum gas, kerosene and bunker fuel, and is widely perceived to be the leading cause of the country’s worsening economic condition.
Authored by Quirino Representative Dakila Cua, Chairman of the House Committee on Ways and Means, HB No. 8083, was renamed the “Tax Reform for Attracting Better and High-quality Opportunities” (TRABAHO) bill, albeit, to remove the apparent stigma caused by Train 1. The bill aims to reduce the corporate income tax rate from 30 percent to 20 percent, and proposes to remove fiscal tax incentives currently enjoyed by companies registered under “The Special Economic Zone Act of 1995”, RA No. 7915, and other related laws.
The lowering of the corporate income tax rates is seen by the administration’s economic managers to encourage more firms to invest in the Philippines, and hopefully offset the negative impact caused by the removal of the fiscal tax incentives. Note however, that the reduction of the corporate income tax rates from 30% to 20% will be done in a staggered manner: 28 percent in 2021; 26 percent in 2023; 24 percent in 2025; 22 percent in 2027; 20 percent in 2029.
According to Cua, “the objective of the TRABAHO bill is to create more jobs and opportunities for our country through encouragement of the private sector to invest and grow their businesses here.” The proposed reduction of corporate income tax rates is said to place the Philippines in parity with its Southeast Asian neighbors, and thus attract more investors.
However, not all are optimistic on whether the reduction of corporate income tax rates will be enough to counter damaged foreign investor confidence brought about by the removal of fiscal incentives. In the news, several companies located in the Subic Bay Freeport Zone are apparently considering pulling out their investments. Even the Director General of the Philippine Export Zone Authority (PEZA), Charito Plaza, has vowed to continue to fight for the retention of the investors’ incentives in economic zones.
“Our incentives in PEZA are working very well. So why should we fix things that are not broken?”, she said, in one of her interviews.
Whichever way you put it, the TRABAHO bill is still Train 2. Whether this train will safely lead us to Busan, remains uncertain.