A leader of the House of Representatives on Saturday expressed hopes that the Senate will act swiftly on the Corporate Income Tax and Incentive Reform Act (CITIRA) bill, that was passed by the House of Representatives on third and final reading on Friday.
Deputy Speaker for Finance Luis Raymund Villafuerte said the Malacañang-endorsed measure supports President Rodrigo Duterte’s vision of financial inclusion “as it will benefit some 90,000 small
and medium enterprises [SMEs] through the gradual lowering of the corporate income tax [CIT] rate to 20 percent from the current 30 percent.”
Villafuerte said the bill “will level the playing field for SMEs, which employ most of the country’s workforce, as they currently pay the regular CIT rate of 30 percent while some 3,000 bigger corporations favored by state-run investment promotion agencies [IPAs] pay a discounted rate of six percent to 13 percent tax on their net incomes.”
“These big companies, many of them on the list of the top 1,000 corporations in the country, can well afford to pay the regular tax rate yet they get to enjoy hundreds of billions of pesos in tax breaks yearly,” Villafuerte said.
Once enacted, Villafuerte said the CITIRA bill will eliminate this unfair practice, and put in place a better system that will be fair to all businesses.
“The new system will encourage firms to innovate, create more jobs, invest in skills training and new technologies, ” said Villafuerte, one of the authors of this CIT reform measure.
President Duterte sought the congressional approval of the CITIRA bill—the second package of his Comprehensive Tax Reform Program—during his fourth State of the Nation Address, saying this would boost SME growth.
The CITIRA or House Bill 313 aims to reduce the current CIT rate of 30 percent and implement a new system of fiscal incentives that is performance-based, timebound, targeted and transparent.
According to Villafuerte, the final version passed by the House did not reduce incentives to investors, but has even transformed these into “super incentives” that will offer higher deductions if companies invest in upgrading the skills of their Filipino workers.
The bill, he said also supports President Duterte’s goal of regional or countryside development as it encourages investments in underdeveloped areas such as communities recovering from armed conflict or major disasters by offering additional tax deductions for companies incurring expenses for public infrastructure, utilities, irrigation, among others, on top of receiving tax incentives beyond the five-year limit.
Villafuerte said that under the bill, companies can get multi-year incentives in the form of income tax holidays, and even lower CIT rates and for longer periods if they locate in the countryside.
Additional deductions will also be given for firms investing in research and development and training, and for those that purchase and use inputs from domestic suppliers, which will be a boon for our SMEs, Villafuerte added.
“Rather than reduce incentives, what we have done is even come up with a better set that is perhaps the most attractive in the region,” Villafuerte said. “This will sharpen our competitiveness in attracting foreign investments that create well-paying, skills-enhancing jobs for our young workforce.”