Elijah Felice Rosales | BusinessMirror | November 22, 2019
Foreign investors are asking senators to deliberate the soonest on the Corporate Income Tax and Incentives Rationalization Act (Citira) bill to put an end to the uncertainties it is bringing to the country’s investment climate.
In an interview with reporters on Thursday, American Chamber of Commerce of the Philippines (AmCham) Executive Director Ebb Hinchliffe aired a public appeal to the Senate to fast-track its discussions on the Citira bill. Prolonging the deliberations on the measure would also prolong the uncertainties it is creating.
“Every day of delay is a day of lack of investments. The longer it goes on, then it benefits other [Southeast Asian] nations instead of the Philippines,” said Hinchliffe. “If this bill is passed as is, it will be a detriment to the current investment climate, as well as the future investors.”
As a member of the Joint Foreign Chambers of the Philippines (JFC), AmCham is opposed to passing the Citira bill as approved by the House of Representatives. Under House Bill 4157, firms operating in economic zones are required to give up their incentives in two years for those in business for over 10 years; three years for those between five years and 10 years; and five years for those below five years.
Further, the House version will strip away tax perks that locators find crucial in maintaining their operations in the Philippines, particularly the 5-percent tax on gross income earned (GIE) paid in lieu of all local and national taxes.
Economic zone locators, mostly multinationals, warned they will be compelled to relocate to another Southeast Asian country if their incentives are lifted. This looming capital flight, according to JFC estimates, will result in job losses of as many as 700,000.
“It’s such a big issue and I’m not sure how fast the Senate can move on it. I do believe right now that if this bill is presented to the Senate and voted up or down, it will be down. I don’t think there are enough senators supporting the current bill,” Hinchliffe said.
If senators want to pass the Citira bill within the year, Hinchliffe suggested that they start deliberations right after the national budget is legislated. Or else, the measure will certainly be carried over for debate next year, spilling over the uncertainties, he warned.
“If we can just reach a few compromises on the status of the current investors and reach a few compromises about the future investments, we got a deal,” he added. The business leader is also requesting the Department of Finance (DOF) to consider the JFC’s proposal of raising the GIE rate to 7 percent instead of rationalizing existing incentives. Under such condition, locators get to keep paying tax based on their GIE.
“We are very open to compromises. If we can get DOF to meet us halfway, my proposal from the [group’s] standpoint is 7-percent GIE. Anything greater than 7 percent is not acceptable, but 7 percent is the perfect number that we could compromise on,” Hinchliffe said.
The Citira bill, which hurdled the House of Representatives in September, will reduce corporate income tax rate to 20 percent by 2029, from 30 percent at present—the highest in the region. It will also rationalize incentives granted to economic zone firms.
The prolonged deliberation on the measure caused investment uncertainties to the Philippines tracing back to last year, when investments in the Philippine Economic Zone Authority (Peza) declined to P68.32 billion, from P78.27 billion in 2017, based on official data.
In October, investors opposed to the Citira bill lost their strongest backer from within the state’s ranks after Peza Director General Charito B. Plaza went on to toe the government line on tax reform. In spite of this, they bared they will insist before the senators that they be allowed to keep their incentives under the Citira bill, as earlier reported by the BusinessMirror (See “Firms brace for Citira battle,” in the Businessmirror, October 23, 2019).
The Citira bill’s 17th Congress version, Trabaho—short for Tax Reform for Attracting Better and High-quality Opportunities—slipped past the lower chamber but was rejected by the Senate.
Source: https://businessmirror.com.ph/2019/11/22/amcham-senate-must-tackle-citira-bill-soon/