MANILA - The Department of Finance said on Tuesday that it has "recalibrated" the tax package meant to reform corporate income taxes and financial incentives so that it can better help small businesses and stimulate the economy.
The DOF has been pushing Congress to approve the Corporate Income Tax and Incentives Reform Act or CITIRA Bill since an earlier measure reforming income taxes was passed in 2018.
Finance Secretary Carlos Dominguez said they have made changes to the proposed bill "to make it more responsive to small businesses negatively affected by the pandemic."
“This will be one of the largest economic stimulus measures in the country’s history,” Dominguez told senators who were conducting a hearing on the government’s response to the COVID-19 crisis.
Among the provisions of the new bill is an across the board cut of the corporate income tax (CIT) rate from 30 percent to 25 percent starting July this year.
The CIT will be further reduced by 1 percentage point per year starting 2023 until it reaches 20 percent by 2027, Dominguez said.
The sunset period for firms under the gross income earned will also be extended under the new bill to 4 to 9 years, from the current proposal of 2 to 7 years.
While earlier versions of the bill were "revenue-neutral", the new bill will actually see the government foregoing revenues just to support small businesses.
“This is not an effort to raise taxes as the package will be decisively revenue negative,” the secretary said.
While President Rodrigo Duterte certified the CITIRA bill as urgent, lawmakers have been reluctant to pass the measure after the first tax reform package called TRAIN, or Tax Reform for Acceleration and Inclusion, was blamed for accelerated inflation following its implementation.
Dominguez, meanwhile, said that COVID-19 is expected to hit government revenues this year.
Government revenues, as percentage of the economy, are expected to decline to 13.6 percent this year from 16.1 percent last year, Dominguez said.
The debt-to-GDP ratio, meanwhile, is seen rising to 49.8 percent this year from 39.6 percent last year as the government borrows more to finance the fight against COVID-19.
The Philippine economy shrank in the January to March period, for the first time since 1998, due to the pandemic and resulting lockdown.
CITIRA, tax reform, economic stimulus, Carlos Dominguez, COVID-19 impact on economy,