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The Philippines’ corporate income tax rate, the highest of 30 percent for ASEAN (Association of Southeast Asian Nations), may drop to 25 percent during a one-time reduction planned in July if Congress will hear the economic team speech contained in their proposed COVID-19 recovery program.
Called the Philippine Program for Recovery with Equity and Solidarity, or “PH-Progress,” Acting Secretary for Socioeconomic Planning Karl Kendrick Chua told the online youth workshop “Sulong Pilipinas” online Thursday that this plan, whose goal was implementation between June and December of this year. year, sought budget flexibility and acquisitions, prioritization of the P4.1-trillion 2020 budget, prioritization of the resumption of the infrastructure program “Build, Build, Build”, job creation and income increases, capital infusion and liquidity in Affected companies also as guarantees through the financial sector and specific tax incentives for investors.
Finance Secretary Carlos Domínguez III said that the PH-Progreso package would cost from P130 billion to P160 billion, but its multiplier effect would bring about P800 billion to P1 trillion in value added to the economy.
Through PH-Progreso, the economy can achieve a “V-shaped” recovery, Chua said, after the first quarter gross domestic product (GDP) fell 0.2 percent and the second quarter is expected contract further to lead the Philippines into a recession.
On Tuesday, the economic team projected a GDP decrease of 2-3.4 percent in 2020.
To recover, the economic team was submitting to Congress three bills: “Bayanihan 2” for spending and capital support to restore consumers’ jobs and incomes, a follow-up to Bayanihan to heal as a single law containing the initial response COVID-19 from the government; the Corporate Recovery and Corporate Tax Incentives Law (Create): an improved version of the pending Corporate Income Tax and Incentives Reform Law (Citira), and the proposed national budget for 2021 of P4.18 billion approved by the Coordination of the Development Budget at Cabinet Committee level (DBCC) on Tuesday.
Under Create, Chua said that a general and immediate reduction of the corporate income tax rate to 25 percent would occur in the middle of the year, unlike Citira, by virtue of which the reduction of the tax rate will be gradual during a 10 %. year before reaching 20 percent.
In addition, Chua said Create would extend the net carry-over of operating losses to five years from three years under the Tax Code, while “losses in 2020 can be credited towards paying future taxes.”
According to Chua’s presentation, new investors would enjoy specific tax incentives, with specific and personalized terms to proactively attract the correct types of investment (driven by demand, led by the Board of Investments, not by supply, to link investors leaving China, etc.) “.
For existing investors, there will be no change to current incentives for the next four to nine years, he said.
As for investors in the field, Chua said “specific and time-bound tax incentives.” [will] support the Balik Probinsya program, Bagong Pag-asa. “
“In all of this, the Fiscal Incentives Review Board (FIRB) [will] manage and decide to grant tax incentives to improve governance, “added Chua.
“Improvements under a version of the bill that is more responsive to COVID-19 could include the President’s power, on the recommendation of the FIRB, to provide a combination of incentives that are better tailored to the unique needs of an investor,” said Domínguez previously.
Regarding Bayanihan 2, Domínguez said it would involve the infusion of additional capital of P50 billion in state lenders Land Bank of the Philippines, which will obtain 70 percent of the amount, and Development Bank of the Philippines (DBP), 30 percent, to provide liquidity to micro, small and medium-sized companies. This is in addition to the P20 billion that will be infused into the unified Philippine Guarantee Corp.
Dominguez said they planned to create a joint venture between Landbank and DBP, which “will be empowered to buy bonds and preferred stock or common stock in qualified companies that need solvency support.”
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