The National Economic and Development Authority proposed the reduction in corporate income tax from the current 30 percent to 25 percent effective July 2020 to help businesses recover from the impact of the COVID-19 pandemic.
National Economic and Development Authority acting Secretary Karl Kendrick Chua said during the Sulong Pilipinas 2020 online briefing Thursday that the proposal to cut the CIT rate would apply to all companies.
“We will propose [to Congress] the [across-the-board] reduction in corporate income tax from 30 percent to 25 percent immediately, or starting July 2020,” Chua said.
Chua said NEDA would also propose that the net operating loss carryover be extended from three to five years and that losses in 2020 be credited to future tax payment.
He said that for new investors, incentives should be targeted, time-bound and tailor-fitted to attract the right types of investments.
“For existing investors, there is no change in present incentives for the next four to nine years,” Chua said.
He said that for countryside investors, tax incentives should be targeted and time-bound to support the “Balik Probinsya, Bagong Pag-asa Program,” an initiative to lure people living in Metro Manila to return to the provinces.
Finance Secretary Carlos Dominguez III earlier pushed for the passage into law of the Corporate Income Tax and Incentives Reform Act to stimulate the economy by attracting more foreign direct investments.
CITIRA aims to reduce corporate income tax rates by 1 percentage point every year from the current 30 percent to 20 percent by 2029.
Chua said the proposals aim to help businesses during the pandemic. “This is where we are right now. But we have the best foundation to recover… Our macroeconomic framework has weakened but our fundamentals remain strong,” Chua said.
“We are in a very good position now to take advantage of our credit rating to borrow and use it wisely,” Chua said.
The Philippines enjoys an investment grade score of “BBB+” with a stable outlook from S&P Global Ratings. Moody’s Investors Service retained the Philippines’ credit profile of “Baa2” with a stable outlook, despite its projection that the economy could contract by 2 percent this year.
The economy declined by 0.2 percent in the first quarter. The inter-agency Development Budget Coordinating Committee projected an economic contraction of 2 percent to 3.4 percent this year.
DBCC said the potential impact of the pandemic to the economy could reach P2 trillion or about 9.4 percent of GDP this year.