IBON questions CITIRA job creation claims

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Research group IBON said
the Department of Finance’s (DOF) claim of over a million jobs to be created by
corporate income tax cuts under the proposed Corporate Income Tax and Incentives Rationalization
Act (CITIRA) is
imaginary. The group said that the DOF is hyping job creation to justify
implementation of regressive tax measures. CITIRA will increase corporate profits and executive pay without
increasing jobs nor even wages, IBON said.

The group recalled that
the DOF repeatedly claimed that the Tax Reform for Acceleration and Inclusion
(TRAIN) law would benefit “99%” of Filipinos or households when they were
lobbying for this. The DOF did so despite knowing, on the contrary, that the
poorest 17.2 million Filipino families would eventually be burdened by
additional consumption taxes especially after the smokescreen of temporary cash
transfers, said IBON.

“The DOF is now claiming
that CITIRA ‘will benefit more than 99% of companies’ and that the proposed
corporate income tax (CIT) cuts will create 1.5 million jobs. There is no
legitimate basis for such a claim,” said IBON executive director Sonny Africa.
“The DOF seeks to justify even more tax cuts for the rich following TRAIN’s
reduction of personal income taxes (PIT).”

“The
DOF’s suddenly claiming that CITIRA will create jobs is suspicious,” Africa
said. He noted that there were no job generation estimates when the bill was
first submitted to Congress in early 2018 as TRAIN Package 2, when it was
passed by the House of Representatives (HOR) in September 2018 as the renamed Tax
Reform for Attracting Better and High-Quality Opportunities (TRABAHO) bill, nor
even at the first Senate hearing on it right after.

Africa recalled that DOF
undersecretary Karl Chua said outright at the Senate hearing: “We do not
see a job impact.” Department of Labor and
Employment (DOLE) director Dominique Tutay on the other hand answered
pointedly: “Mayroon po [mawawalan ng trabaho].” Africa said
that it was only on October 17, 2018, that the DOF suddenly declared in a press
release that the proposed law would create 1.4 million jobs.

He added: “The DOF’s job generation claim is
unfounded speculation that has no theoretical or
empirical basis.” “The new jobs will
supposedly come from businesses ‘reasonably’ spending half of their increased
profits from the lower corporate income tax ‘in growing their businesses’ but companies
already have enough profits as it is,” Africa said.

He cited DOF reports that large firms account for some three-fourths
(75%) of corporate income tax collections. Africa pointed out that the profits
of the country’s Top 1000 biggest corporations have been growing some 12%
annually in the past decade, and have more than tripled from Php415 billion in
2008 to Php1.33 trillion in 2017.

“Simplistically claiming
that corporate tax cuts will magically create 1.5 million jobs is deceitful as
the argument opportunistically ignores key economic realities,” said Africa. He
pointed out that global growth is slowing, trade is weakening, foreign
investment flows are falling, and protectionism is growing, while Philippine
economic growth has already slowed to its lowest in 17 quarters.

“It is more likely that
CITIRA’s tax cuts will just go to increasing corporate profits and justify
increasing already exorbitantly high executive pay. They will certainly not go
to increasing wages because corporations have kept real wages flat for over a
decade-and-a-half despite rising labor productivity,” concluded Africa.

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