CONCEDING that the bill on rationalizing incentives would not be passed before the legislative break, Finance Secretary Carlos G. Dominguez III is hoping that the measure would have a better chance of being passed once Congress resumes its session.
This, as Congress is set to start its break on March 13. Congress will be on break until May 3.
Asked on the fate of Corporate Income Tax and Incentives Rationalization Act (Citira), Dominguez said in a Viber message to reporters on Wednesday: “Postponed, I guess.”
Despite this, he still expressed confidence that the long-pending measure would finally be hurdling Congress after the break.
President Duterte on Tuesday certified the Citira bill as urgent. With the urgent certification, a bill need not undergo the three-day rule between the second and third reading, with approval on both levels done within the same day.
On Wednesday, Senate Ways and Means Committee Chairman Pia Cayetano said she welcomed Duterte’s certification as urgent of the Senate’s Citira version, but apparently that wasn’t enough.
“This Presidential directive underscores the urgency to forge a more fair, efficient and accountable tax system—one that should foster a stronger economy amid the many challenges our country is facing.
“The certification also affirms the position earlier taken by our top economic managers, finance experts, and various business organizations fully backing SBN 1357,” Cayetano said in a statement.
The Senate version of Citira, she said, “is a result of the successive discussions our committee conducted with investors to address their concerns.
And what we repeatedly heard from various stakeholders is that we need to pass this measure.”
On February 19, Cayetano delivered her sponsorship speech on Senate Bill 1357 (Citira bill).
Finance Undersecretary Karl Kendrick T. Chua had argued that the faster reduction in the corporate income tax rate as lobbied by industry groups could result in a revenue impact of 0.5 percent of GDP or P105 billion on the first year of implementation.
Industry groups are proposing a faster reduction in the CIT rate, wherein the the current 30 percent corporate income tax rate will be trimmed to 25 percent on the first year of implementation of the law to allow the Philippines to compete with the average of 22.5 percent in Asia and 23 percent globally; and that a 1-percent reduction will be implemented yearly thereafter until it reaches 20 percent.
However, Chua explained that they are projecting a P21-billion revenue impact for every 1 percentage point reduction in the corporate income tax rate under Citira.
“As I said, if they want 25 percent [CIT] rate, then that is a 0.5 percent of GDP revenue impact,” he said in a Viber message to the BusinessMirror.
IT-BPO fund
In their consolidated position paper addressed to Sen. Cayetano, industry groups said Senate Bill 1357 should also adopt the P5-billion structural adjustment fund to support the information technology and business-process outsourcing industry.
Inserted in the House version of the Citira bill, the fund can be used by firms for trainings to graduate IT-BPO workers from standard voice calls to higher value-added services, they explained.
However, DOF’s Chua said there’s no need for the structural adjustment fund in the Senate bill as this “gives them more incentives than the House bill already.”
He also pointed out that the Senate version also addressed their key concerns. The measure has a longer sunset for firms to continue enjoying their current incentives, keeps the gross income earned system, as well as the one-stop shop feature of the Philippine Economic Zone Authority.
The position paper was crafted by the Joint Foreign Chambers of the Philippines, Information Technology and Business Process Association of the Philippines, and the Semiconductor and Electronics Industries in the Philippines Foundation Inc.
The Citira bill was passed by the House of Representatives last year.
The Philippines lost at least $12 billion worth of investments over the past two years due to the prolonged deliberation on the Citira bill, according to Albay Rep. Joey S. Salceda.
“Any investment loss is due to uncertainty due to delay in passage. Once passed, investors will invest even more,” Chua said.
Image credits: Roy Domingo