Bill lowering corporate tax moves to Senate plenary
MANILA, Philippines – Senator Pia Cayetano sponsored the proposed Corporate Income Tax and Incentive Rationalization Act (Citira) at the Senate plenary on Wednesday, February 19.
Cayetano called her version of Citira a "fair deal" and the "best deal for Filipinos."
"A major source of resistance to this bill is the fear that incentives will be removed once this measure is enacted. This will not be the case, Mr President. In truth, what we intended to do is to continue a sound incentives scheme," she said.
Citira is the renamed version of the Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho) bill that was passed by the House of Representatives in the previous 17th Congress, but failed to hurdle the Senate.
Senate Bill (SB) No. 1357, the upper chamber's version of Citira, will reduce the corporate income tax (CIT) rates by one percentage point every year from the current 30% down to 20% by 2029. This means that if the bill is passed into law in 2020, CIT would be at 29% for this year.
Under the proposed measure, qualified firms would be able to avail of 2 to 4 years of income tax holiday and another 3 to 4 years of special CIT rates.
The special CIT would be 8% of a firm's gross income in 2020, in lieu of national and local taxes. By 2021, it would be 9% of its total income and then 10% in 2022 onwards. It could be extended for a maximum of 12 years.
Qualified firms would also be able to avail of the regular CIT regime with enhanced reductions for 5 to 8 years, which could also be extended by 3 or 4 years at a time for a maximum of 12 years.
SB No. 1357 also extends the sunset period to 7 years for firms currently paying the rate of 5% of gross income earned, in lieu of all taxes, for firms that export 100% of output, employ 10,000 Filipino workers, or engage in what is called footloose manufacturing.
Footlose manufacturing is defined under the bill as an activity or project with direct labor expense to asset ratio of at least 70% for 3 consecutive years, after Citira would be implemented. A company should also export 100% of its manufactured goods and have its actual operations located outside Metro Manila.
The Department of Finance (DOF) said it hopes that the adjustments under SB No. 1357 from the previous Trabaho bill would "expedite" the Senate plenary debates. It expects Citira to generate around 1.4 million jobs, mostly in small and medium enterprises, in the next decade.
"As many investors and credit rating agencies tell us, speed is a concern at this stage. The sooner we pass Citira, the earlier the 'wait-and-see' attitude of many investors will end and the sooner more investment will flow into the country," Finance Undersecretary Karl Chua said on Wednesday.
The DOF hopes Citira will hurdle the Senate before Congress goes on break by March 14.
In his 4th State of the Nation Address in July 2019, President Rodrigo Duterte had urged Congress to prioritize Citira.
The counterpart measure at the House was passed in September last year. – Rappler.com