THE measure that will eventually lower the corporate income tax to 20% from the current 30% and streamline fiscal incentives is expected to hurdle the Senate Ways and Means Committee next week.
On Wednesday, the panel also began tackling the proposal to simplify the tax structure for financial instruments, in an attempt to meet the Department of Finance’s (DoF) year-end target to pass all tax reform packages.
Senator Pilar Juliana S. Cayetano, who chairs the panel, said during Wednesday’s hearing that she is “close to sponsoring CITIRA (the Corporate Income Tax and Incentives Rationalization Act) on the floor. She noted she is hopes to sponsor the bill by Tuesday next week.
Ms. Cayetano said the report adopted the proposal to lower the CIT within a span of 10 years, similar to the House-approved version to reduce the rate by two percentage points every other year.
“For the first portion, where we will bring down from 30% to 20% our corporate income tax over the span of around 10 years. The other part is rationalization of incentives that have been given over the decades to different sectors and industries,” she said at a briefing Wednesday.
She did not yet disclose the incentives under the proposed reform; but noted it will seek to limit the duration of incentives and will be granted based on the assessment of the Fiscal Incentives Review Board (FIRB).
The bill will “indicate very clearly what the incentives are and we will streamline the granting of incentives with the FIRB.”
“There will be clearer parameters, clearer numbers, so that the industries can make their computations. Sunset provisions that end on a particular date new terms are very clearly identified.”
Also on Wednesday, the Finance department held its initial briefing on the proposed Passive Income and Financial Intermediary Act (PIFITA), which Undersecretary Karl Kendrick T. Chua said will reduce the number of rates to 36 from the current 80.
Mr. Chua also said the Philippines imposes the highest taxes on passive income in Southeast Asia, reducing the economy’s competitiveness.
“We proposed that the 20% highest withholding tax on interest income, in general, be reduced to 15%,” he said. “To offset this and to keep the rates at a harmonized level, we proposed that the 10% tax on dividends for individuals be increased to 15%.”
The measure will lower the rates on the documentary stamp tax on debt instruments, original shares of stock and debt instruments, and non-life insurance to 0.75%.
Asked whether the Committee can approve all the remaining packages of the tax reform program within the year, Ms. Cayetano said she can at least have it sponsored in the plenary.
“Kaya ko siyang ma-sponsor (It’s within my power to sponsor), but as you can see it’s not just my sole decision.”
Mr. Chua also said the proposal will repeal a total of 33 out of 43 special laws, granting passive income and documentary stamp tax exemptions to various sectors. Of this, 19 are “true repeals,” while the remaining 14 repeals represent a “cleaning-up” laws that have likely run their course.
The 10 special laws that will be retained are those concerning the Government Service Insurance System, Social Security System, and PAG-IBIG Fund among others.
The repeal of the 19 special laws, Mr. Chua said, will generate around P11.3 billion.
Senate Minority Leader Franklin M. Drilon said the exemptions call into question the true cost of maintaining government-owned and -controlled corporations (GOCCs).
“Apart from the exemption, they are also given subsidy; so the total cost to the people is at P11 billion. If we remove these exemptions, we really see what kind of subsidy they’re getting rather than the unseen subsidy through tax exemptions.”
“Again, this will be an input as to whether or not these GOCCs should continue to exist.”
Also among the remaining reforms is the proposal to provide a uniform framework for real property valuation and assessment.
The government has so far passed Republic Act No. 10963, which slashed personal income tax rates and increased or added levies on several goods and services — the main component of the tax reform package — RA 11213, which grants estate tax amnesty and amnesty on delinquent accounts left unpaid even after being given final assessment; and RA 11346 and 11467, which increased excise tax on alcohol products and conventional and electronic cigarettes. — Charmaine A. Tadalan
