A SENATE COMMITTEE on Wednesday approved a priority bill of President Rodrigo R. Duterte that seeks to lower corporate income tax and streamline fiscal incentives.
The Ways and Means committee endorsed the proposed Corporate Income Tax and Incentives Reform Act (CITIRA), which will gradually cut the tax on companies to 20% by 2029 from the current 30%, for Senate plenary debates.
Senator Pia S. Cayetano, who heads the committee, said there’s a “very good chance” the Senate would approve the bill on final reading by March 13, before Congress goes on a Holy Week break.
Senate Bill 1357 (SB 1357) also seeks to gradually lower the income tax on resident and non-resident foreign corporations to 20% by 2029.
Regional operating headquarters, which pay 10% of their taxable income, must pay the regular income tax two years after the law is enforced.
The measure also grants an income tax holiday for two to four years. After this, companies will have to pay a special corporate income tax of 8% this year; 9% in 2021; and 10% in 2022 based on gross income earned, in lieu of all national and local taxes, according to the bill.
At present, companies enjoy four to six years of income tax holiday, and afterwards have to pay 5% tax based on gross income earned.
The bill also gives as much as 50% additional deduction on labor and power expenses during the taxable year, or up to 100% additional deduction on research and development expenses.
This may be granted for five to eight years, but may not be availed of simultaneously with the income tax holiday and special corporate income tax.
The duration of the tax holiday, special tax and enhanced deduction will depend on the location and industry of a registered business.
The measure classifies registered businesses as basic, enhanced or advanced. Basic enterprises are those engaged in agriculture, fishing, forestry and agribusiness in the National Capital Region (NCR) and other cities.
Enhanced enterprises cover those engaged in agriculture-related activities and local suppliers in areas adjacent to the capital.
Advanced enterprises are those in the agriculture industry and providers of local products in less developed areas, as well as businesses engaged in highly technical manufacturing and service activities.
Senate Bill 1357 will exempt capital equipment, raw materials, spare parts and accessories from import duties.
The Senate version addresses many concerns, including the one-stop shop feature of the Philippine Economic Zone Authority (PEZA), power cost issues, provisions for footloose firms and the length of the sunset period, Finance Secretary Carlos G. Dominguez III said in a statement.
“The Senate version has made these adjustments, while remaining consistent with the key principles of this tax reform,” he added.
Trade Secretary Ramon M. Lopez in a mobile phone message cited the “very balanced” version of the Senate bill, particularly the clause on the transition period.
PEZA would review the Senate version and suggest possible changes, Director General Charito B. Plaza said in a separate text message.
The measure forms part of the Duterte administration’s comprehensive tax reform program, which includes proposals to simplify the tax structure for financial instruments, provide a uniform framework for real property valuation and increase state share in mining revenue.
The government has enacted a measure cutting personal income taxes and increasing or adding levies on several goods and services.
Another tax law grants estate tax amnesty and amnesty on delinquent accounts, while two more laws separately increased the excise tax on alcohol products and conventional and electronic cigarettes.
Senator Ralph G. Recto said he found the pace of the tax cuts “too slow,” adding that he preferred a “one time, big time” reduction.
“I’m supportive of reducing the corporate income tax, although the 1% yearly cut for the next 10 years is too slow,” he said at a briefing.
Mr. Recto also said he might propose a separate fiscal regime for exporters in the manufacturing and service industries.
“I don’t think we should impose too much taxes on exporters and the business process outsourcing industry,” he said.
Mr. Recto said he might also introduce separate tax rates for micro, small, medium and large enterprises.
Senate President Vicente C. Sotto III earlier said the chamber was unlikely to approve Senate Bill 1357 by March, citing intricacies of the measure. — Charmaine A. Tadalan