OBJECTIONS to the corporate tax reform bill could be receding because of its potential for resuscitating the economy, though it may need to be reconfigured before it becomes a full-blown post-pandemic stimulus measure, legislators from both chambers said.
Senate President Vicente C. Sotto III said after a caucus Monday that senators agreed to include the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA), or Senate Bill No. 1357, in the May 4-June 5 agenda.
CITIRA was initially positioned as a corporate tax reform measure. It lowers the corporate income tax (CIT) to 20% eventually and streamlines fiscal incentives. The measure was passed in the House in September but stalled in the Senate before it recessed for the Easter break, during the course of which the coronavirus disease 2019 (COVID-19) outbreak locked down Luzon and disrupted the economy.
Senator Juan Edgardo M. Angara, vice chairman of the chamber’s ways and means committee, said the the measure will have to be amended in response to the crisis.
“We should settle the incentive debate to eliminate any uncertainty in the minds of (potential and actual) investors,” he said in a phone message Tuesday. “We may have to tweak the bill given the current difficult economic environment.”
Still pending in the Senate are measures that will simplify the tax structure for financial instruments, and provide a uniform framework for real property valuation. These bills were passed by the House of Representatives in September and November, respectively.
Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the National Economic and Development Authority (NEDA) is in talks with Congress over the possible incentives that may be granted to essential industries.
“I think it will be a combination of targeted and time-bound tax incentives. There will be credit guarantees and there will also be direct subsidies to their workers,” Mr. Chua said on ANC Tuesday.
He said a longer transition period may be considered due to the pandemic to allow businesses to adjust.
“The core element of the fiscal incentive modernization is really right, and it is about having more performance-based, targeted, time bound and transparent incentives. I think we should still pursue that, and once the transition period has ended, then we can use a new system of incentives to attract even better investments.”
The government has so far enacted measures cutting personal income taxes and increasing or adding levies on several goods and services.
Another law grants an estate tax amnesty and an amnesty on delinquent accounts, while two more laws separately increased the excise tax on alcohol products and conventional and electronic cigarettes.
In the House, Representative Jose Maria Clemente S. Salceda of Albay, who chairs the chamber’s ways and means committee, said any adjustments to the bill should include a marked preference for companies introducing proven technology.
“Somebody who has established technology should be given more incentive than one who has been there for 35 years. Are we reducing incentives? In general, no. We’re just being more transparent and more value-adding,” he told BusinessWorld by phone Monday.
He said sentiment on CITIRA has shifted “because there’s a stimulus being pursued, of course in addressing COVID and addressing congestion in Metro Manila,” he added, referring to proposals to provide incentives for businesses to relocate to the provinces, an initiative known as “Balik Probinsya.”
Metro Manila remains the epicenter of the outbreak in the Philippines, largely because the population in the capital is highly concentrated because of the lack of economic opportunity in the hinterland.
Mr. Salceda has said the House plans to include COVID-19 relief via incentives when CITIRA is discussed at the bicameral conference committee.
In response to Sen. Christopher Lawrence T. Go’s “Balik Probinsya” proposal, Mr. Salceda said CITIRA is “structurally biased towards incentivizing countryside development.”
“While NCR (National Capital Region) projects get three years of income tax holiday (ITH) and two years of enhanced deductions, adjacent provinces get four years of ITH and three years of enhanced deductions. Even better, areas outside these regions get six years of ITH and four years of enhanced deductions,” he said on April 24.
Mr. Salceda said that while CITIRA’s passage is currently in the Senate’s hands, the House is thinking of taxing the e-commerce industry more after consumers turned to online channels during the quarantine.
“We want to tax; we have to cover e-commerce. We have to tap the platforms. Pinag-aaralan na namin (We are studying the matter), actually,” he said. — Charmaine A. Tadalan and Genshen L. Espedido