Finance chief seeks new tax reforms

MANILA, Philippines – The Department of Finance (DOF) is pushing for the approval of the Corporate Income Tax and Incentives Rationalization (Citira) Act to attract foreign investors and revive the economy hit by the pandemic.

Finance Secretary Carlos Domínguez III made the appeal in a meeting with President Duterte and other top government officials on Monday night.

Domínguez was proposing various economic priorities as part of the country’s recovery program while dealing with the effects of the new coronavirus pandemic.

The urgent approval of Citira, the second package of the Comprehensive Tax Reform Program, is vital to attract foreign investors “in search of resilient economies with high growth potential like the Philippines.”

Domínguez requested Duterte’s support for the immediate approval of the bill before Congress suspends June 3. Mr. Duterte certified the bill as urgent last March.

“This will involve urgent approval of Citira or package two of the Comprehensive Tax Reform Program, which we are now proposing to include flexible tax and non-tax incentives so that we can target specific companies that we want to invest here,” he said.

Citira seeks the reduction of corporate income tax from 30 percent to 20 percent over a period of 10 years. It also proposes to streamline the tax incentive system.

“The best effort” in the Senate

Senate President Vicente Sotto III said the Senate would do its “best effort” to approve Citira before the session is adjourned in June, but several of his colleagues are concerned about the move.

Minority leader Franklin Drilon said he supported the tax reform bill “in general” and said that rationalizing the incentives it proposes actually means reducing the benefits that some companies enjoy.

“The senators, I think, are divided on this issue,” he said.

Senator Juan Edgardo Angara, who chairs the finance committee, said the Philippines should investigate what neighboring countries were doing with respect to investors.

Senator Imee Marcos said she was concerned that Citira would keep investors away.

Marcos noted that many companies were looking to move from China or expand to other countries after the COVID-19 crisis.

The Philippines should encourage them to relocate here, he said, adding that the government should review the measure.

While Senator Francis Pangilinan said he understood the need to raise taxes, he cautioned against imposing more money on companies on the brink of bankruptcy and closure.

House open to changes

The House of Representatives will accept modifications to Citira, including a “faster reduction” of the corporate income tax instead of a more gradual schedule.

Albay’s representative, Joey Salceda, chairman of the House of Representatives’ media and media panel, said the House, which already approved its version of Citira in September last year, was open to proposals to make the measure more responsive to the coronavirus pandemic, which was not taken into account when approved.

“The emerging proposal is an immediate 30 to 25 percent in one go [decrease] in 2020 compared to the annual reduction of 1 percent, and then let the next administration have flexibility over the other 5 percent, “Salceda told reporters.

“This sends a strong signal that the country is open to business, subject, of course, to our need to finance infrastructure, health and education,” said the House leader.

In response to the DOF’s call to speed up its pace, Salceda said the House “has done everything possible to get Citira approved as soon as possible.”

“Already in September, we were already finished, with a version that took into account the executive’s points, but also listened to all the feelings of the interested parties,” he said.

The lower house approved Citira by a 170-8 vote with six abstentions on September 13.

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