Finance Sec. Carlos Dominguez III has called on the Senate to include the economic team's proposal on immediately cutting the corporate income tax rate from 30 percent to 25 percent starting July this year, along with other investor-friendly measures, when it opens plenary debates on Package 2 of the Duterte administration's comprehensive tax reform program.
Dominguez said the Congress can help stimulate the economy amid the coronavirus disease 2019 crisis through the urgent passage of the "calibrated" CTRP Package 2, previously known as the Corporate Income Tax and Incentives Reform Act or CITIRA.
With its direct integration into the country’s economic recovery program and proposed enhancements, the economic team has renamed the former CITIRA as the Corporate Recovery and Tax Incentives for Enterprises Act.
The head of the government’s economic team, described CREATE as "one of the largest economic stimulus measures in the country’s history," given that the measure would free up almost P42 billion in business capital for 2020 alone, and P625 billion over the succeeding five years.
On top of the outright five-percent tax cut in 2020, the CREATE bill also seeks to provide for a one-percentage point reduction in the CIT each year until 2027 so that the rate would only be 20 percent by that time.
“The large and immediate rate cut in the second half of 2020 also sends a strong signal to the world that the Philippines is positioning itself as a premier investment destination for companies that are looking to diversify their supply chains,” the DoF chief said in his recent report to the Senate on the government’s ongoing socioeconomic efforts to defeat the Covid-19 contagion.
This recalibrated Package 2 is “clearly not an effort to raise taxes as (this) will be decisively revenue-negative," leaving more resources in the hands of business owners to fund operations and retain employees, he said.
Dominguez has expressed hope that the Congress would pass the CREATE bill before it adjourns next month so that the across-the-boHaHHrd CIT reduction can be implemented by July this year.
He said the measure aims to fuel economic dynamism, especially among the country’s growth engines — the micro, small and medium enterprises — that employ a majority of Filipino workers.
An enhanced net operating loss carry over, extended from three to five years, for losses incurred in 2020 is part of the proposal and would be applicable to all businesses that are not large taxpayers.
Other salient provisions of the corporaould tax reform would be retained, such as targeting incentives to support investment in the countryside and expanding the role of the existing Fiscal Incentives Review Board, which would streamline the management and governance of tax incentives.