MANILA - The House of Representatives has started plenary deliberations on a bill proposing to lower corporate income taxes and rationalize fiscal incentives.
The bill, known as Corporate Income Tax and Incentives Rationalization Act (CITIRA) was refiled in the 18th Congress after failing to get the nod of the Senate in the 17th Congress.
CITIRA, which used to be called the TRABAHO bill, seeks to encourage investments by slashing the country's corporate income tax (CIT) rate from 30 percent to 20 percent.
It aims to make up for the lost revenues from the lower tax rate by removing fiscal incentives granted to select firms.
The bill's authors say the measure aims to ensure that the grant of fiscal incentives helps bring in the greatest benefits, such as higher and more dispersed investments more jobs, and better technology; ensure fairness and transparency in the grant of fiscal incentives; and enhance the accountability of taxpayers through more efficient tax administration.
House Ways and Means chairperson Rep. Joey Salceda said he made 2 amendments to the bill. Salceda proposed to set up a fiscal incentives review board to be chaired by the Department of Finance (DOF). He also pushed to revise the timelines for the staggered reduction of corporate income taxes and income tax holidays as the government transitions to the new tax regime.
Under the measure, the CIT will be reduced by 2 percent every 2 years until it reaches 20 percent. Starting Jan. 2021, the CIT will be decreased to 28 percent, and will be 20 percent by Jan. 2029.
The bill also provides for the removal of not only preferential tax rate of certain corporate taxpayers but also the option for corporations, including resident foreign corporations, to avail of the 15 percent gross income tax.
It also removes the perpetual 5 percent on gross income earned and limits income tax holidays. Incentives will be granted for a maximum of 5 years, but investors and locators are encouraged to reapply after the five-year or seven-year period.
The measure also grants the President the power to grant incentives if the project has a comprehensive sustainable development plan and will bring in at least $200 million.
Meanwhile, the Home Development Mutual Fund or Pag-IBIG will be exempted from income taxation given that the Social Security System, Philippine Health Insurance Corporation, and Government Service Insurance System are already exempted.
The DOF has said that incentives should be "performance-based, time-bound, targeted and transparent" as the government was losing revenues to tax perks. In 2017 alone, the government gave away P441 billion in tax incentives to 3,139 firms, the DOF has said.
However, several business groups have warned that removing incentives will lead many export-oriented firms to shut down their operations in the country and cause thousands of job losses.
The DOF meanwhile said it was confident that the new ease of doing business law as well as modern infrastructure will make the Philippines more attractive to investors and make up for the loss of some incentives.