THE House of Representatives yesterday approved on third and final reading the measure that seeks to reduce corporate income taxes and limit fiscal incentives.
House Bill 4157 or the Corporate Income Tax and Incentives Rationalization Act (CITIRA) got 170 affirmative votes as against eight negative with six abstentions.
This is the second tax reform package being pushed by President Rodrigo Duterte. The first one was the Tax Reform for Acceleration and Inclusion (TRAIN) which was signed into law on December 19, 2017.
This new tax reform package aims at cutting gradually the corporate income tax rate to 20 percent from 30 percent over a 10-year period.
Likewise, it limits fiscal incentives granted to select firms by removing the option for corporations, including resident foreign corporations, to take advantage of the 15 percent gross income tax.
During the 17th Congress it was called Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho) which was approved in the House of Representatives but not in the Senate.
On tax perks, CITIRA incentives may only be given to exporters and industries listed in the Strategic Investments Priority Plan (SIPP).
It also allows the President to grant incentives if a project has a comprehensive sustainable development plan and will bring in at least $200 million.
Incentives will also be given for a maximum of five years, removing perpetual 5 percent on gross income earned and limiting income tax holidays, unless approved by the Board of Investments.
The measure also seeks to rationalize fiscal incentives or remove certain perks. The Citira bill retains the current incentives for two years, for investors to have enough time to adjust to the new tax scheme. Perks would also be targeted, time-bound, and transparent.
According to House ways and means committee chairman and Albay Rep. Joey Salceda, the CITIRA would be the “most attractive investment regime in the region.”
“I’ve been an analyst for decades. Believe me CITIRA is better,” Salceda said.
For its part, the Department of Finance (DOF) said CITIRA is expected to generate around 1.4 million jobs, mostly in small and medium enterprises, in the next decade.
On the other hand, the Philippine Ecozones Association strongly opposed the 2nd tax reform package, as it would have a negative impact on foreign direct investments in economic zones across the country.