‘Wrong timing’ to pass CITIRA as COVID-19 cripples businesses – senators

MANILA, Philippines —  Several senators believe that passing the President’s latest tax reform package may be ill-timed when businesses are struggling due to the impact inflicted by the coronavirus disease (COVID-19) pandemic.

In separate statements on Tuesday, some lawmakers expressed doubt that the Corporate Income Tax and Incentives Reform Act (CITIRA) could be approved in the Senate before Congress goes on break in June, as earlier urged by Finance Secretary Carlos Dominguez III.

But Senate President Vicente Sotto III said the chamber would give its “best effort” to do so.

CITIRA, which has been certified as urgent by the President Rodrigo Duterte last March, seeks to gradually reduce the country’s corporate income tax rate by one percent every year—from 30 percent to 20 percent in a decade.

It would also rationalize fiscal incentives given to firms to make these “performance-based, time-bound, targeted and transparent.”

The House of Representatives has already passed the tax reform measure, which is still awaiting Senate approval amid concerns that it would drive away investors due to the proposed reduced tax perks.

Senator Sonny Angara, chair of the Senate finance committee, said lawmakers would need to “tread carefully” in passing the tax reform bill given the “drastically different economic environment.”

“First rule is probably not to lose any of the present investors we already have since the investment outlook doesn’t look fantastic going forward,” he said in a message to reporters.

Angara further pointed out that the government should look into what neighboring countries are doing.

“We should study what our neighbors are doing as we will inevitably be compared to them, whether we like it or not,” he said.

“Also, consumer behavior may change also going forward. But in general, it is good to settle the uncertainty over the incentives debate in the near future,” he added.

Meanwhile, Senator Grace Poe admitted being wary of passing CITIRA in a time when companies are looking for “the more cost-efficient way” to run their business amid the health crisis.

“Madugo ang debate diyan sa pagdating sa buwis e. Alam mo, medyo nagaalinlangan ako sa CITIRA now that we are experiencing the shift in doing business,” Poe told reporters in a teleconference.

(Debates on tax are always done meticulously. You know, I’m slightly wary of CITIRA now that we are experiencing the shift in doing business).

She pointed out that due to the pandemic, companies would continue to outsource services from countries like the Philippines, where labor costs are lower than in other countries.

“With CITIRA, we are actually taking out the benefits or the exemptions or incentives for these companies. So, it will be hard for us to catch those investments,” the senator said.

“Wala tayong masyadong investment, papanong re-relocate dito? Kaya para sa ngayon, baka medyo wrong timing pa ito,” she added.

(We won’t have much investment, how can the companies relocate here. That’s why now, it may be the wrong time).

For Senator Francis Pangilinan, the government’s economic team can perhaps “look to borrowings rather than taxes to help fund the economic recovery efforts.”

“While we understand the need to raise money to fund our economic recovery efforts, I am wary of imposing more taxes on businesses already on the verge of bankruptcy and closure and individuals who have either lost their jobs or whose incomes have shrunk considerably,” Pangilinan said.

Senator Imee Marcos also agreed that passing CITIRA might not be apt in the wake of a pandemic.

“I think i-revisit natin yung CITIRA at wag masyado nating asahan na ito ay makakapagbigay ng mas maraming tax at koleksyon kasi hirap talaga lahat. Palagay ko hanggang 4th quarter (ng taon) baka naghihikahos pa ang madaming negosyo,” she said in an online press briefing.

(I think we should revisit CITIRA and we should not expect that we can collect more taxes because everyone is having a hard time. I think even in the 4th quarter of the year, many companies will still be struggling).

Meanwhile, Senate Minority Leader Franklin Drilon said the chamber might not have enough time to deliberate on the measure.

“In general, I support CITIRA law. It will ‘rationalize,’ which actually is a reduction of the incentives now enjoyed by investors. Whether or not it is the right time to ‘rationalize’ incentives is open to debate,” Drilon said in a message to reporters.

“The senators, I believe, are divided on this issue. Moreover, the Senate only has 6 session days to debate, amend, pass and do the (bicameral conference committee). Is there enough time?” he added.

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