The Foundation for Economic Freedom (FEF) expressed their support to the rationalization of fiscal incentives under Tax Reform for Acceleration and Inclusion (TRAIN 2).
In a statement, the FEF commended the major principles proposed to rationalize fiscal incentives, namely: 1) to link incentives to performance; and 2) to limit the focus of incentives to sectors that will generate economic benefits such as employment, exports, etc.
The FEF also supports the phasing out of all existing incentives except for a subset of companies which are employment-intensive, and are likely to move to other countries without incentives; the granting of new incentives outside of this small subset, which will be centralized in an Economic Development and Fiscal Incentives Review Board, where employment and contribution to economic development shall be the paramount considerations; rules for the granting of incentives should be clear, transparent, and minimizes discretion from the government bureaucracy; the phasing out of incentives for redundant investment, i.e. investment will likely be done anyway even without incentives, such as for mineral exploration; and accompanying TRAIN 2 with administrative reforms that will improve the professionalism, efficiency, and accountability of taxing authorities.
The group also supports further the retention of the 40% OSD (Optional Standard Deduction), rather than a reduction to 20%, in line with the principle of making tax compliance easy and simple, as well as the reduction in the corporate income tax rate to 25% or even lower, should government finances allow it, in order to align the country’s tax rates with the rest of ASEAN.
