Senators on Wednesday said they will not be swayed by calls to rush the passage of the Duterte administration’s second package of the Tax Reform for Acceleration and Inclusion (TRAIN 2) law, apparently shaken by an international think tank’s opinion that the second tax-reform bill will hurt the inflow of investments to the country.

“We will study the matter carefully, as it very much impacts on the Philippines’s reputation as an investment destination,” said Sen. Juan Edgardo M. Angara, chairman of the Senate Ways and Means Committee tasked to scrutinize tax laws.

Angara, responding to a query by the BusinessMirror, said his committee will tackle the concerns raised by BMI Research, which announced on Tuesday the results of its analysis on the TRAIN 2 version submitted by the Department of Finance to the House of Representatives.

BMI noted that the second tax-reform bill could derail the inflow of investments because the removal of tax incentives will more than negate the encouraging impact of the reduction in corporate income-taxes.

BMI, a research arm of Fitch ratings agency, also said the planned corporate-tax cut to 25 percent is not enough, because the Philippines’s neighbors are offering much lower rates.

“Given the increase in foreign direct investments [FDI] recently, as well as the country garnering the title of best investment destination recently, we should tread carefully,” the senator suggested.

Angara also assured that the Senate panel will “view the incentives review, not just from the standpoint of foregone revenue, but from the standpoint of jobs, incomes, technology transfer and overall development.”

Senate President Aquilino L. Pimentel III, however, is sought to play down apprehensions in the business community over the TRAIN 2 package.

“TRAIN 2 is supposed to be revenue neutral,” the Senate leader said, adding “its aim is to rationalize the tax system.”

Sen. Sherwin T. Gatchalian, who chairs the Senate Committee on Economic Affairs, cautioned against the inclusion of provisions that will remove existing incentives meant to attract more investors to the country.

While noting that the Philippines is known to have the highest corporate income-tax rate, “one positive aspect of TRAIN 2 is to be competitive.”

“I would be cautious because [one reason] those investors came here was for the incentives offered,” the senator said, adding: “It would not be fair to remove incentives in the middle of their operations.”

“It would not send a good signal,” he stressed.

“We also need to consider promoting the country as a bright spot, but the ease of doing business has not improved, unlike our neighbors,” Gatchalian added, noting that the worsening traffic condition also “affects the cost of doing business.”

The senator advised concerned administration officials to go slow in tinkering with existing incentives meant to lure more investors.

“We have to be cautious in removing incentives because some industries are not as competitive,” he said, “or else they won’t set up here anymore.”

Current Philippine laws grant an attractive package of incentives, including income-tax holiday for a maximum of eight years, followed by a perpetual 5-percent tax on gross income earned, and zero value-added tax on local purchases and up to 30 percent of local sales, among others.

The new tax-reform proposal now calls for an overhaul and streamlining of these incentives, including a limit on Philippine Economic Zone Authority incentives to a maximum of 10 years and to increase the 5-percent tax on gross income earned to 15-percent tax on net income.

“Despite the proposed corporate income-tax cut, we note that tax rates in the Philippines will still be one of the highest and least competitive in the region, and the repealing of tax incentives to investors will likely make it worse. This comes at a time when other countries in the region are trying to offer more tax incentives in order to attract FDI,” BMI Research said.

“Although the quid pro quo approach may be fiscally prudent, it creates more uncertainty for businesses. We believe that this could weigh on investment over the near-term, as investors adopt a wait-and-see approach,” it added.

The Philippines, after being a laggard in FDI, registered an all-time high FDI inflow in 2017, the Bangko Sentral ng Pilipinas (BSP) reported just this week.

The BSP said FDI in 2017 hit a total of $10.05 billion for the whole year, 21.4 percent higher than the $8.28 billion seen in 2016.