TRADE SECRETARY Ramon M. Lopez is studying an exporter-supported bill proposing to immediately reduce corporate income tax from 30%.
The Philippine Exporters Confederation, Inc. (Philexport) said in a statement that it supports Senate Bill No. 595 filed by Senator Ralph G. Recto. The bill applies segmented tax rates according to companies’ taxable income.
Companies with taxable income of P400,000 or less will be taxed 5% under the proposed bill. Companies that make over P8 million are taxed 25% of the excess over P400,000.
Mr. Lopez told reporters Friday that the proposed system might discourage higher income activities.
“Offhand, parang it might discourage mga new activities, the yearning (for) more. Importante naman kasi, if you apply the same corporate income tax rate on the (high) income, malaki ‘yung absolute value na rin — they pay more at the current system, (Offhand, it might discourage new activities, the yearning for more. That’s a significant point because if you apply the same corporate income tax rate on high earners, the absolute value will be big — they pay more under the current system),” he said.
However, he sees the positives of immediately applying higher taxes on high-income companies if the move is linked to the bill reducing corporate income tax and rationalizing incentives.
The proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) would reduce corporate income tax to 20% from 30% over 10 years.
Mr. Lopez noted that the immediate shift in taxation would improve government revenue.
“Kaysa matagal bumaba ‘yung 30 to 20 (percent corporate income tax in CITIRA). So in that context, I really have to study pa. Kasi kung ganun, it makes sense, kung gusto siguro makasingil agad sa high income, hindi magkakaroon ng revenue loss yung DoF (Department of Finance). (The 30 to 20% reduction takes a long time. So in that context, I really have to study this further. Because it makes sense — DoF will forego less revenue if it can charge high-income companies immediately),” Mr. Lopez said.
Philexport said that the immediate reduction of corporate income tax would put the country at par with other Southeast Asian countries, adding that the bill would also help small businesses.
“(This) will help MSMEs (micro, small and medium enterprises) enjoy even lower tax rates than the proposed 20% CIT,” Philexport President Sergio Ortiz-Luis said.
The average corporate income tax rate in Southeast Asia is 22.4%, Philexport said.
Mr. Lopez said that he will study the bill further before arriving at a final position. — Jenina P. Ibañez
