TRABAHO Bill sets huge subsidy fund
For affected workers, ecozones
The government has to appropriate huge funds over a five-year period to subsidize, compensate, provide training to workers and economic zones that maybe affected as a result of the rationalization of the country’s fiscal incentives under the proposed Tax Reform for Attracting Better and High Quality Opportunities (TRABAHO) Bill.
This appropriation falls under Sec. 312 – the Structural Adjustment Fund – of the proposed bill now pending for deliberation at the Senate.
For the workers alone, the bill seeks total annual subsidy of 130 billion. Another 115 billion have been sought to support economic and Freeport zones affected by the government’s incentives rationalization bill.
For instance, under the Structural Adjustment Fund the IT-business process outsourcing (IT-BPO) industry will receive an annual subsidy of 15 billion or a total of 125 billion for the entire five-year period from the government to upgrade the skills of industry workers and improve their chances of getting hired in new jobs.
The IT-BPO subsidy will be solely used to pay for the formal academic or training programs of accredited private or public schools and training centers to employees that may be displaced as a result of the rationalization of fiscal incentives.
This safety net measure is expected to help improve the employability of affected workers. In addition, the government shall also appropriate 1500 million annually or 12.5 billion over a five-year period, in addition to any adjustment fund appropriated under the budget of the Department of Labor and Employment, to provide targeted cash grants or other support programs to displaced workers of firms that may be affected by the rationalization of fiscal incentives.
Another 1500 million annually or 12.5 billion for five years have to be earmarked to provide targeted trainings to displaced workers of affected firms. In addition to any adjustment fund appropriated under the budget of pertinent government departments/agencies, the bill also sets a 115-billion annual subsidy for the development of infrastructure surrounding and within the areas/localities of special economic zones
and freeports to be affected by TRABAHO Bill.
This particular subsidy must be utilized to support research and development, costs of power, water and other utilities, lease of properties, and other economic activities relevant to developing these areas.
Releases of these funds will be through the investment promotion agencies to be governed by implementing guidelines to be promulgated by the departments of finance and budget and management.
Earmarking for these funds shall be terminated five years after the effect of the law, the proposed bill stated. The TRABAHO Bill, which is the second package of the government’s comprehensive tax reform program, seeks to harmonize all the fiscal incentives and put a cap on the perpetual 5 percent tax on gross income earned and limit the income tax perks to investors in the country.
In lieu of the reduction of these perks, the bill has prepared a menu of other incentives the government deems more relevant to specific sectors, aside from a gradual reduction in the current 30 percent corporate income tax rate.
Earlier, Senator Sonny Angara said the Senate committee would not proceed with its deliberation of the TRABAHO Bill unless the government can present definitive data on the impact on jobs.
During Tuesday’s hearing, Finance Undersecretary Karl Chua insisted that more jobs will be created in the long run under the TRABAHO bill or House Bill 8083 passed by the House of Representatives.
However, Labor Department Director Dominique Tutay admitted that the second package of tax reform, which seeks to lower corporate income tax while cutting cut incentives, might lead to job losses.
“I’m surprised that the Lower House passed this measure even without such study. The government should really take this issue on jobs seriously. Millions of families and livelihoods are at stake here. The bill should stay true to its name — that it would create more jobs rather than kill them,” said Angara, chairman of the ways and means committee.