MANILA, Philippines — The Department of Finance (DOF) is pushing for the passage of the Corporate Income Tax and Incentives Rationalization Act (Citira) to attract foreign investors and revive the pandemic-battered economy.
Finance Secretary Carlos Dominguez III made the appeal in a meeting with President Duterte and other high-ranking government officials on Monday night.
Dominguez was proposing several economic priorities as part of the country’s recovery program as it grapples with the effects of the novel coronavirus pandemic.
The urgent passage of the Citira, the second package of the Comprehensive Tax Reform Program, is vital in attracting foreign investors “in search of resilient, high growth potential economies like the Philippines.”
Dominguez asked for Duterte’s support for the immediate passage of the bill before Congress adjourns on June 3. Mr. Duterte certified the bill as urgent last March.
“This will involve the urgent passage of Citira or package two of the Comprehensive Tax Reform Program, which we now propose to include flexible tax and nontax incentives so we can target specific companies that we want to invest here,” he said.
The Citira seeks the reduction of the corporate income tax from 30 percent to 20 percent over a 10-year period. It also proposes to rationalize the tax incentive system.
‘Best effort’ at Senate
Senate President Vicente Sotto III said the Senate would give its “best effort” to approve Citira before it adjourns in June, but several of his colleagues have concerns about the measure.
Minority Leader Franklin Drilon said he supported the tax reform bill “in general” and said the rationalization of incentives that it proposes actually means reducing perks that some companies enjoy.
“The senators, I believe, are divided on this issue,” he said.
Sen. Juan Edgardo Angara, who chairs the finance committee, said the Philippines should look into what neighboring countries were doing regarding investors.
Sen. Imee Marcos said she was concerned that Citira would keep investors away.
Marcos noted that many companies were seeking to relocate from China or expand to other countries after the COVID-19 crisis.
The Philippines should entice them to relocate here, she said, adding that the government should revisit the measure.
While Sen. Francis Pangilinan said that he understood the need to raise taxes, he warned against imposing more money on businesses on the brink of bankruptcy and closure.
House open to changes
The House of Representatives will accept modifications to Citira, including a “faster lowering” of the corporate income tax instead of a more gradual schedule.
Albay Rep. Joey Salceda, chair of the House ways and means panel, said the House, which already passed its version of Citira in September last year, was open to proposals to make the measure more responsive to the coronavirus pandemic, which was not taken into account when it was passed.
“The emerging proposal is an immediate 30-percent-to-25-percent one-time [decrease] in 2020 versus the 1-percent yearly reduction, and then let the next administration have flexibility over the other 5 percent,” Salceda told reporters.
“This sends a strong signal that the country is open for business, subject, of course, to our need to finance infrastructure, health and education,” the House leader said.
Responding to the call of the DOF to hasten its passage, Salceda said the House “has done all it can to get Citira passed as soon as possible.”
“As early as September, we were already finished, with a version that took the executive’s points into account, but also heard all of the sentiments of the stakeholders,” he said.
The lower chamber approved Citira by a 170-8 vote with six abstentions on Sept. 13.