1M jobs, 1% GDP growth promised in 2nd tax package approved by House

MANILA, Philippines—The House of Representatives on Friday approved on third and final reading the second package of the Comprehensive Tax Reform Program of the Duterte administration which a ranking House member said would create a million jobs, add 1 percent to gross domestic product growth and only a fraction of a percent to inflation.

Voting 170-8-6, the House approved House Bill No. 4157, or the Corporate Income Tax and Incentives Rationalization Act (CITIRA), which seeks to gradually reduce the corporate income tax (CIT) rate and rationalize incentives for businesses.

Albay Rep. Joey Salceda, chair of the House ways and means committee and one of the sponsors of the bill, said the measure would create over a million jobs, add one percent of Gross Domestic Product (GDP) growth on its first year, and will only add 0.9 percent to inflation.

Salceda, in a statement, said that by reducing corporate income tax from 30 to 20 percent, “we are mobilizing the dynamism and efficiency, productivity and innovation of the domestic corporate sector.”

The approval came in between the lawmakers’ scheduled plenary deliberations on the proposed P4.1-trillion national budget for 2020.

The measure seeks to start bringing down corporate income taxes by 2021 by one percent annually until it reaches 20 percent in 2029.

It also offered more incentive schemes for investors, particularly income tax holidays and reduced corporate income tax.

The incentives scheme for enterprises in areas adjacent to Metro Manila would include four years of income tax holiday and three years of reduced corporate income tax.

Businesses outside Metro Manila would be given a tax holiday of six years and four years of reduced corporate income tax.

The bill would also strengthen the powers of the Fiscal Incentive Review Board (FIRB) in granting incentives, particularly on investment promotion agencies (IPAs).

The CITIRA bill is the refiled and renamed version of the Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho) bill from the 17th Congress. It was originally called TRAIN 2, or the second tranche of the Tax Reform for Acceleration and Inclusion (TRAIN) law.

It hurdled second reading at the House last Monday, Sept. 9.

READ: House OKs on 2nd reading bill lowering corporate tax, fixing incentives

The Makabayan bloc and two independent lawmakers opposed the bill.

Bayan Muna Rep. and House Deputy Minority Leader Carlos Zarate said the measure was a “regressive tax system” that will not benefit ordinary Filipinos.

ACT Teachers Rep. France Castro said that there was no assurance that foreign corporations, which will be exempt from millions of pesos in tax, will re-invest their tax savings in the country.

She also said the passage of the measure would mean massive job lay-offs and the increase in unemployment and underemployment.

“Taxpayers will fund the structural adjustment fund with a minimum of P21 billion for job losses and training,” Castro said in her explanation of a “no” vote.

Gabriela Rep. Arlene Brosas said that the CITIRA bill will have no “concrete and direct benefits” to Filipinos, but will instead give “preferential treatment to big foreign businesses at the expense of small-micro interprises who can barely compete on the economies of scale.”

She also said the measure, if enacted into law, would allow the President to award land rights and water resources and grant power subsidies to eco-zones.

Buhay Rep. Lito Atienza opposed the passage of the bill as it was “hastily” done and “open for corruption.”

“I believe in any law that concerns taxation, we should be very prudent. We should be more careful. We are amending 53 provisions on taxation on different subject matters and that by itself exposes the whole process of  passing this law possibly to corruption,” said Atienza./jpv/TSB