THE Senate on Thursday inched closer to passing its version of the Comprehensive Income Tax and Incentives Reform Act (Citira) amid apprehensions Congress may run out of time to wrap up a final reconciled Senate-House version of the Palace-certified bill given the fast approaching congressional recess on June 5.
This, as the Economic Affairs Committee chief aired confidence that if Citira—now renamed “CREATE” in the House of Representatives—were tweaked so it boosts businesses rather than taxes them more, lawmakers can beat the deadline in crafting a final version of the bill, the second plank of the Comprehensive Tax Reform Program (CTRP) that the House approved in 2019.
It had been pending for months in the Senate, where unresolved arguments over the rationalization of tax incentives were overtaken by the Covid-19 pandemic, which forced both House leaders and economic managers to revise some provisions in response to desperate pleas from businesses gouged by the virus-induced lockdowns for two months.
House Ways and Means panel chairman Joey Salceda said earlier this week the tweaks in the House bill will be introduced when congressmen sit down with senators in a bicameral conference, since the House version had already been approved in 2019.
Senators, meanwhile, are reportedly in touch with economic managers on Citira as well as a proposed stimulus package to revive the economy and businesses, especially micro, small and medium enterprises (MSMEs). These employ over 90 percent of workers and were hardest hit by the enhanced community quarantines.
“The Citira can be passed in the next few days if it is overhauled post-Covid,” asserted Sen. Imee Marcos on Thursday, as economic managers pitched its speedy approval. Finance Secretary Carlos G. Dominguez III had said earlier that before considering a multibillion-peso stimulus package that will drain government coffers at a time it cannot even collect taxes from ailing businesses, Congress should simply approve Citira.
To prod it along, Dominguez has since yielded on some key parts of Citira, notably a faster reduction of the corporate income tax rate from 30 percent to 25 percent just in the first year of implementation.
Marcos, who chairs the Senate Economic Affairs committee, told the BusinessMirror that “the Department of Finance has itself accepted this and is set to submit a new version,” referring to DOF’s acknowledgment that Citira’s main goal should not be to impose a tax burden but encourage investors and give business leeway to recover.
“With businesses hemorrhaging and families locked down, now is not the time to impose new taxes,” Marcos added in an SMS to this paper.
The senator stressed that “as we try to rescue our economy, protect jobs and ensure the health of our citizens, what we need instead by way of tax are deep reductions, deferrals and more tax exemptions.”
Amid fears in some quarters that the government may be overstretched in its response to the pandemic and may end up ratching up more debts, Marcos argued, there is “no choice but to borrow—after all, of what use is our Triple B rating if we do not use it to borrow at almost-zero interest?”
Marcos added that “in the midst of the suffering wreaked by Covid, those pronouncements of a forthcoming Fitch A rating and an upper middle-class rating by yearend seem irrelevant and misguided.”
Economic managers have recently said, however, that they were prepared to set aside for now the attainment of upper middle-income country (UMIC) status for the Philippines, as it recovers from Covid-19’s devastation.
Latest estimates by the Development Budget Coordination Committee put the expected damage to the economy at P2 trillion or about 9.4 percent of GDP this year, way beyond initial estimates of P1 trillion.
The DBCC now expects the economy to contract by 2 percent to 3.4 percent this year. If such happens, it would be the worst GDP growth rate of the country since the 6.9-percent GDP contraction in 1985 based on 2018 prices.
Sen. Richard Gordon, for his part, pointed out that Citira “in its current form also proposes the removal of fiscal incentives and is not just a reduction of corporate income taxes.”
He thus cautioned economic managers against “pushing for any tax measure during this Covid-19 pandemic.” In his view, “the provision of immediate financial assistance for the business sector should be made on the condition that they would not be retrenching any of their existing employees.”
Like several other senators, Gordon is open to adopting the House version of the Philippine Economic Stimulus Act (PESA) bill crafted by leading economist-lawmakers.
He said the stimulus package should “include the provision of financial assistance for MSMEs and exporters, wage subsidies and livelihood assistance for affected workers, and continued provision of cash grants for families still living in areas under the modified enhanced community quarantine.”
Image credits: Louie Sauro Millang/ Senate PRIB via AP
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