Salceda calls for reforms to boost Foreign Direct Investments; House tax chair wants simplified, pro-taxpayer system to reduce tax risks, boost investments

December 1st, 2021

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) is calling for the enactment of “crucial reforms” to boost the country’s bid for more foreign direct investments. The House tax panel chair made the pronouncement during the Arangkada Philippines: Pathways to a Better Future forum of the Joint Foreign Chambers (JFC).

Salceda said that the enactment of the amendments to the Public Service Act, the Retail Trade Liberalization Act, and the Foreign Investments Act, as well as the Ease of Paying Taxes Act, will ensure that the country is more attractive to investors.

“There are three key elements to the decision to invest: The constraints, the risks, and the potentials. On constraints, the questions are “Is the door open in the first place? What can keep the investor from investing more?” On risks: How secure is the investment? What can keep the investment from making a return? Finally, on potential: What’s in it for the investor? Does the upside or the margin justify the investment?”

“We addressed the upside with the CREATE Law, but we still need to address constraints, through the liberalization bills, and risk, particularly tax uncertainty, through EOPT.”

Salceda says that he estimates that tax uncertainty increases the “hurdle rate” or the profit margins required by an investor before investing in the Philippines, by 3.43%.

“That means the upside has to be bigger before investors even take a look at the country. We can solve this by simplifying the tax system.”

Under the EOPT, Salceda is proposing:

1. Simplified tax filing for all, but even simpler requirements for smaller enterprises, with a “small taxpayers service”
2. Fully digital and online filing of requirements for processes such as TIN application and RDO change
3. Only sales invoice will be required in VAT processing instead of both invoice and official receipt, avoiding conflicts between both records, reducing required documentation, and shortening processing time
4. Clear taxpayer bill of rights
5. Risk-based auditing of taxpayers, instead of current BIR principle that all taxpayers can be audited. (New insertion in the EOPT)

“You want to encourage the act of voluntarily paying taxes. Foreign investors tend to be more meticulous with their taxes, because they risk breaking both our laws and the laws of their origin countries. You want more of them here,” Salceda remarked.