The National Tax Resarch Center (NTRC) cautioned against the sudden cut in the corporate income tax (CIT) rate as it could disturb the country’s stable macroeconomic fundamentals.
“Lowering of the CIT rate will result in substantial revenue loss that may jeopardize or put at risk economic growth or reverse whatever gains the Philippines has achieved so far in terms of macroeconomic stability,” the National Tax Research Center (NTRC) said in its latest journal.
“Hence, for revenue considerations, in the event that lowering of CIT is considered, a staggered reduction of CIT is deemed more judicious than outright reduction to cushion the impact of the proposal on government coffer. It is also worthwhile to consider putting a trigger or condition to the reduction so as not to unduly affect the government’s basic financial metrics and cash flow,” the government tax think tank added.
NTRC’s recommendations are consistent with the proposals from the House of Representatives and the Department of Finance (DoF).
The House Bill No. 7458 proposes an annual 1% cut in the CIT rate from the current 30% to 20%. The Finance department on the other hand seeks to lower the rates to 25%, but will only cut 1% upon collecting 0.15% of gross domestic product, or about P26 billion, from rationalizing corporate incentives.
Both proposals meanwhile seek to remove incentives that do not qualify in the government’s medium-term Strategic Investment Priorities Plan and the performance contract as dictated by the Fiscal Incentives Review Board, among other parameters.
The NTRC noted that the Asian regions’ “race to the bottom” in giving away corporate incentives has led to the grant of “redundant incentives, proliferation of wasteful incentives, and differing tax incentives regimes, among others.”  — Elijah Joseph C. Tubayan

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