IBON questions CITIRA job creation claims

October 3, 2019

by IBON Media

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.