President Rodrigo Duterte, in a letter to Senate President Vicente Sotto III, has certified as urgent a bill seeking to reduce corporate income taxes and rationalize fiscal incentives system.
The President said in his letter the bill’s quick passage was important “to promote foreign direct investment inflows and the expansion of business ventures conducive to economic growth and job generation.”
Senator Pia Cayetano, Senate ways and means chairperson, in her sponsorship speech described Senate Bill 1357, or the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) as fair and the best deal for all.
But Senator Imee Marcos on Monday said she was not in favor of implementing some provisions of the proposed CITIRA, considering the economic threats of the coronavirus disease 2019 (COVID-19) to the country.
CITIRA, the second package of the Duterte administration’s comprehensive tax reform program, seeks to reduce the corporate income tax rates from the current 30 percent to 20 percent in 2029, on a staggered basis.
The bill is also expected to rationalize fiscal incentives given to firms to make these “performance-based, time-bound, targeted, and transparent.”
At the same time, the bill intends to prioritize incentives to business activities that generate domestic employment; promote research, development and innovation; promote agribusiness; and invest in areas that are less developed or are recovering from disasters and conflicts, among others.
It will also offer additional tax deductions to reward corporations’ good behavior, such as local job creation, exports, and investment in high technology, according to committee sources.
The committee is also proposing to implement sunset provisions for firms currently enjoying fiscal incentives to help them transition to the new tax regime under CITIRA.
The bill would also rationalize fiscal incentives which includes the removal of the five percent tax on gross income earned firms operating in economic zones pay in lieu of all national and local taxes after their income tax holiday period ends.
The measure forms part of the Duterte administration’s comprehensive tax reform program, which includes proposals to simplify the tax structure for financial instruments, provide a uniform framework for real property valuation and increase state share in mining revenue.
