House Economic Stimulus Cluster’s co-chair, Albay 2nd district Rep. Joey Sarte Salceda, has renewed his cal for the speedy enactment by Congress of his pending Corporate Income Tax and Incentives Reform Act (Citira), with a big time five perceny (5%) corporate income tax reduction immediately to attract investors and counter the crippling effects of the COVID-19 pandemic on the country’s economy.
Citira is the second package of the Comprehensive Tax Reform Program (CTRP) of the Duterte administration, following the now operative TRAIN law, also crafted by Salceda. It has been passed twice by the House — the first time in 2018 but final Senate action was derailed by the 2019 election. Certified urgent by President Duterte, the newly constituted House passed it anew late last year. It is now pending in the Senate where it got snagged by the recently ended congressional recess and now by the COVID-19 crisis.
The measure seeks to rationalize tax incentives for businesses by reducing corporate income tax rate from 30%, the highest in Southeast Asia, down to 20% over a ten year period. It was initially designed to boost the country’s gross domestic product by 3.6% annually while adding only 0.9% to inflation. It is now seen as a cushion to prevent the economy from further slumping back due to the pandemic disaster.
Salceda, House Ways and Means Committee chair and principal author of Citira, said he will propose an immediate 5% one-time reduction during the bicameral conference committee meeting with the Senate on the proposal. “This will send a strong signal that the country is open for business, subject of course to our need to finance infrastructure, health, and education,” he added.
The Citira bill seeks to amend sections of the National Internal Revenue Code to reduce corporate income tax in the next decade, while gradually removing tax breaks for investors. To address the COVID crisis, Salceda said President Duterte may be allowed to tweak the corporate income tax (CIT) reduction and fiscal incentives of investors, under a proposed revision of the Citira.
“We intend to insert the Covid-19 crisis as an eligibility during the bicameral conference committee meeting with the Senate which will grant the President—and not a fiscal incentives board—the flexibility to grant CIT and fiscal incentive to firms affected by the crisis,” he explained. With Salceda’s flexibility proposal, the President can allow a Covid-19-affected firm to get lower CIT rate early.
Earlier, the Philippine Chamber of Commerce and Industry appealed to the government to keep its generous incentives for firms to attract companies, which are now relocating out of China. The Makati Business Club issued a statement last month urging Congress to “expeditiously pass the corporate income tax and incentives rationalization legislation that has been under considering for almost two years.”
Salceda said Citira is also seen to help push the propped government Balik-Probinsya Program, since it is structurally biased towards incentivizing countryside development. “I welcome the efforts to make CITIRA more responsive to Covid-19 crisi. The House-approved version anticipated the structural need to reduce population density in NCR through Balik Probinsya by providing twice the incentives for investments in countryside development — -5 for NCR and 10+ for the regions.”
What is needed to be adopted, he said, is a “build it and they will come” approach to the program and the enticements that offer tax holidays and enhanced deductions.” He added that to attain the goal, there has to be a comprehensive plan to address the fundamentals of every province in terms of investments, increased and easier access to capital, improvement in technical and public education and agricultural modernization.
The lawmaker said that while in the National Capital Region, investments get three years of Income Tax Holidays (ITH) and two years of enhanced deductions, while adjacent provinces get four years of ITH and three years of enhanced deductions. Other areas outside Metro Manila, however, have even better incentives with six years of ITH and four years of enhanced deductions.
Salceda said investors relocating from NCR or adjacent areas, investing in agribusiness or locating in areas recovering from armed conflict or major disaster should get an additional two years of ITH and a year of enhanced deductions.
“We are reaching out to confer with the economic managers and our Senate counterparts on the other modifications but in principle, I want these done as soon as possible. All arguments have already been heard. The opponents have nothing new or strong to say anymore. It’s time for the Senate to make a decision,” he stressed.