The Finance Department asked the Senate to do its part and pass a bill seeking to reduce the corporate income tax and correct the incentives system for businesses after the House of Representatives approved on third and final reading the Tax Reform for Attracting Better and Higher Quality Opportunities or Trabaho bill.
The proposed bill is the second package of the Comprehensive Tax Reform Program. The first package called Tax Reform for Acceleration and Inclusion or Train law took effect in January, which cut down personal income taxes but raised the excise taxes on alcohol, tobacco, fuel, sweetened beverage and automobile.
Finance Secretary Carlos Dominguez III said the proposed reforms in corporate taxation would not only help sustain the economy’s high growth trajectory but would also benefit around 90,000 small and medium enterprises that provide a large number of jobs.
“We are thankful that the House under the leadership of Speaker Gloria Macapagal Arroyo has heeded the call of President Duterte in his 3rd State-of-the-Nation Address to swiftly pass the CIT reform bill, which comprises Package 2 of his comprehensive tax reform program,” Dominguez said.
“This measure, as the speaker had correctly stated, ‘will bring us to the next level of development’,” he said.
Quirino Rep. Dakila Carlo Cua, who held several hearings on the bill when he was then-chairman of the House ways and means committee, was the measure’s principal author and sponsored its approval before the House plenary.
The House approved on Sept. 10 its version of the CIT reform bill known as the Trabaho Act. Under the leadership of Arroyo, who had strongly supported the bill, it took just took 34 working days after President Duterte’s appeal to Congress to have the measure passed.
A total of 187 lawmakers voted for the Trabaho bill on third and final reading.
Dominguez asked the Senate “to likewise heed the president’s call for an equitable tax system by giving its stamp of approval to Package 2,” which remained pending in the chamber’s ways and means committee.
President Duterte said that Package 2 “will lower corporate income taxes, especially for our small businesses,” which, in turn, “mean they will have more money to invest and create more jobs.”
The president urged Congress to pass Package 2 before the end of the year.
More than 99 percent of businesses are the micro, small and medium enterprises that employ around 65 percent of the country’s workers.
“The enactment of Package 2 is what stands between today and millions of jobs in the near future,” the President said in his SONA.
Dominguez said correcting the flaws in the fiscal incentives system, which currently favor only a select set of enterprises that can well afford to do away with such perks, would level the playing field for all businesses, especially the SMEs, and attract new players to compete under this fair and equitable environment.
Dominguez said the pro-investment tax reform package would ensure that fiscal incentives remain, as long as they were performance-based. This means that companies should commit to meeting targets such as job creation, export sales, countryside growth and research and development.
Incentives should also be time-bound, which means tax perks are not granted indefinitely; targeted so that only industries that provide multiplier benefits to the economy will be given incentives; and transparent to ensure that recipients report the incentives they get to the government and the public.
