Charmaine A. Tadalan | BusinessWorld | September 25, 2019
The proposal to reduce the corporate income tax and overhaul fiscal incentives that was approved by the House of Representatives has some “unacceptable” provisions, a Senate leader said, Tuesday.
“I’m worried about CITIRA (Corporate Income Tax and Incentives Rationalization), really worried about CITIRA,” Senate Majority Leader Juan Miguel F. Zubiri told reporters, following concerns raised by foreign business chambers that the measure could result in 703,000 job losses in the first year.
Still, Mr. Zubiri said that, “[o]n the onset, we support the rationalization of fiscal incentives. We don’t believe that industries that have gotten incentives for the last 30 years should have it for another 30 years.”
American Chamber of Commerce of the Philippines, Inc. Senior Adviser John D. Forbes, who represented the Joint Foreign Chambers (JFC), said tax incentive overhaul under House Bill No. 4157, or the CITIRA, will affect 121,000 direct and 582,000 indirect jobs.
“CITIRA destroys a highly successful incentives system that has brought in foreign investors to create significant industries that export goods and services,” Mr. Forbes said, adding that maintenance of the status quo for fiscal incentives can add one to two million direct jobs and four to eight million indirect jobs.
At the same time, the JFC supported reduction of the CIT but at a faster pace, by lowering the rate to 25% from the current 30% upon enactment and by one percent every year until it reaches 20%.
House Speaker Alan Peter S. Cayetano and Senate President Vicente C. Sotto III chat before President Rodrigo R. Duterte delivered his fourth State of the Nation Address at the House of Representatives in Quezon City in this July 22 photo. — REUTERS
The House approved on Sept. 13 the bill, which will lower CIT to 20% by 2029, remove tax incentives deemed redundant and make all the rest time-bound and subject to economic benefits they bring.
The measure had hurdled the chamber in the 17th Congress, but hit a dead end in the Senate, where it failed to secure even just committee-level approval.
The Senate Ways and Means committee, chaired by Senator Pia S. Cayetano, will continue deliberating the measure even when Congress takes an Oct. 5-Nov. 3 break. “… [S]hortly after that we will have the budget hearing, so I will not be able to defend anything on the floor, so I want to try to finish the hearings if possible, consolidate the report and if I have enough information then I’ll be ready to come up with a committee report,” Ms. Cayetano said.
Mr. Zubiri said “for the record, unacceptable sa’kin ‘yung House version.”
“What the House passed right now, for us, I’ve spoken to Senator Ralph Recto, I’ve spoken to Senator Villar, other senators, this is unacceptable to us.”
“(Albay-2nd district) Congressman (Jose Ma. Clemente S.) Joey, the chairman [of the House Ways and Means committee], has to bend back. He cannot come into this negotiation with that…”
Mr. Zubiri aired anew his initial proposal for the period for the lower tax on gross income earned (availed of after income tax holidays lapse) of five to seven years (from no limit currently) and a rate of seven percent (from five percent currently). The House version provided for two to five years and maintained the current five percent GIE.
“Based on consultation, we realized that some of the (economic zone) locators may be open to higher GIE for as long as we can lengthen the transition period and the higher GIE can be considered instead of five percent, we can adjust to seven or eight percent,” Trade and Industry Secretary Ramon M. Lopez said in the same hearing.
The proposed CITIRA forms part of the administration’s comprehensive tax reform program, which was among the bills mentioned by President Rodrigo R. Duterte in his July 22 fourth State of the Nation Address, along with other packages which will increase excise tax on alcohol products and e-cigarettes, centralize real property valuation and assessment, and simplify tax structure for financial investment instruments.
The government has already enacted Republic Act No. 10963, which slashed personal income tax rates and increased or added levies on several goods and services; RA 11213, the Tax Amnesty Act, which grants estate tax amnesty and amnesty on delinquent accounts left unpaid even after being given final assessment; and RA 11346, which will gradually increase excise tax on tobacco products to P60 per pack by 2023 from P35 currently.
The proposed tax reform is also among the priority bills that 14 local and foreign business groups pitched last July to the 18th Congress and the Office of the President.
Source: https://www.bworldonline.com/difficulties-seen-over-tax-reform-differences/