By Elijah Joseph C. Tubayan, Reporter
THE SENATE will start next week committee-level work on the second tax reform package designed to overhaul the corporate tax and incentives scheme.
“We’ll most likely begin hearings on the bill next week,” Senate ways and means committee chairperson Senator Juan Edgardo M. Angara said in a mobile phone message on Tuesday.
“We in the Senate will probably scrutinize the measure thoroughly — its effect on jobs, prices, given the state of the economy at present,” he added in apparent reference to spiking inflation — which clocked in at a surprising near-decade-high 6.4% in August and a year-to-date 4.8% against the central bank’s 2-4% full-year target for 2018 — that has been blamed partly on the first tax reform under Republic Act No. 10963 that took effect in January.
This was after the House of Representatives approved on final reading on Monday House Bill No. 8083, or the “Tax Reform for Attracting Better and High-quality Opportunities” (TRABAHO) bill.
The bill seeks to cut the corporate income tax (CIT) rate gradually to 20% from 30% currently by a two-percentage-point deduction every other year starting 2021 in a bid to put the country at part in this regard with its Southeast Asian peers.
The measure also streamlines corporate fiscal incentives by removing those deemed redundant that have been costing the economy billions of pesos in foregone revenues, ensuring that only those that satisfy performance criteria will enjoy such perks and making income tax holidays and other perks time-bound.
The Department of Finance (DoF) had intended the measure to be revenue-neutral, but the removal of a provision pegging the pace of CIT rate reduction to revenues raised from streamlined perks had raised concerns that it could throw a wrench on the state’s carefully watched fiscal balance. The version approved by the House states that the President may even “advance the scheduled reduction” in CIT rate “when adequate savings are realized from the rationalization of fiscal incentives…”
Senators have been lukewarm to the measure, arguing that removal of some incentives may lead to job losses, but eventually Senate President Vicente C. Sotto III filed a counterpart measure last month.
The Senate version cuts the CIT rate to 25% in the first year of implementation, while the Finance department has wanted the cut to be 25% as well, but conditional on the amount of additional revenues raised from streamlining of incentives.
The DoF aims to have TRABAHO implemented starting 2019.