Finance Secretary Carlos Dominguez III
MANILA – The Department of Finance (DOF) will further push for approval by Congress the proposed Corporate Income Tax and Incentives Reform Act (CITIRA) to drive economic bounce back initiatives.
During the webinar of the Harvard Business Group PH on Wednesday, Finance Secretary Carlos Dominguez III said people are focusing on the issue of tax incentives removal when they talk about CITIRA, which should not be the case.
Dominguez said the proposed measure is actually primarily about tax cuts thus, the Finance department will push for its approval.
“In that way, we are prepared to help everybody across the board by reducing corporate income taxes. So, I think, that could be a big stimulus program to the economy,” he said.
Dominguez further said the proposed measure aims to make incentives more targeted, citing the country’s incentives law only benefited the investors and not the government or the economy for the last 40 years because it is a “one size, fits all” measure.
“That is, I think, is the wrong way to go about,” he said.
Dominguez said what should be done is to know what the investors need so that the government can make policies tailor-fitted for a specific industry.
The DOF is supporting the proposed CITIRA bill in the Senate, or the Senate Bill (SB) No. 1357, since this version is targeted to make the country highly competitive in the region.
Under this proposal, foreign companies are given two options, one of which is an income tax holiday (ITH) for two to four years, and then a special tax rate on gross income for three to four years.
If the measure is approved this year, the special tax rate on gross income will be increased from the current 5 percent to 8 percent this year, and then by 1 percent each in 2021 and 2022.
Former Finance Undersecretary and now acting Socioeconomic Planning Secretary Karl Chua earlier said the ITH and special rate under the first option can be extended up to 12 years, which is longer than the five-year period being offered by Thailand.
The second option provides investors the regular corporate income tax rate with enhanced deductions for five to eight years, which could be extended by three to four years.
The proposed deductions under the second option include up to 50 percent additional cuts on power expenses, up to 50 percent additional cuts on labor expense to promote job creation, up to 100 percent additional cut on research and development (R&D) to promote innovation, and up to 50 percent additional deduction on domestic input expense to encourage domestic supply chain. (PNA)
