By Cai U. Ordinario & Bernadette D. Nicolas
THE government’s losses due to the reduction in corporate income tax (CIT) may reach at least P667 billion between 2020 and 2027, according to the Department of Finance (DOF).
Finance Assistant Secretary Antonio Joselito Lambino II told the BusinessMirror total revenue losses could reach P625 billion between 2021 and 2025, and P42 billion in the second semester of 2020.
The estimate still does not include specific projections for 2026 and 2027, when CIT is expected to further decrease.
“Our estimate is a revenue reduction of close to P42 billion for the second half of 2020, and P625 billion for the succeeding five years. It is the largest stimulus package through corporate tax reform in the country’s history,” Lambino said.
In a recent webinar of the Financial Executives of the Philippines (Finex), Socioeconomic Planning Secretary Karl Kendrick T. Chua said the government is keen on reducing the CIT to around 20 percent by 2027, earlier than the initial estimate of 2029.
This after Chua said in a presentation to the House of Representatives that the CIT will be reduced to 25 percent from the current 30 percent this year. The target of the government is to implement this by July 2020.
This is part of the repackaged Corporate Income Tax and Incentives Rationalization Act (Citira), which will now be called Corporate Recovery and Tax Incentives for Enterprises Act, or CREATE.
Lambino said after the reduction in CIT this year, the tax will be reduced by one percentage point annually between 2023 and 2027.
With this, the CIT will reach 24 percent in 2023 followed by 23 percent in 2024; 22 percent in 2025; 21 percent in 2026; and 20 percent in 2027.
“The reform will put more money in the hands of businesses to support their employees and reinvigorate their operations post ECQ [enhanced community quarantine], Lambino said.
In the presentation earlier obtained by the BusinessMirror, Chua said the proposed CREATE is part of the recovery stage under the Philippine Program for Recovery with Equity (PH-Progreso), or the proposed economic recovery program of the Development Budget Coordination Committee (DBCC).
The government plans to implement the recovery stage from June to December 2020.
According to Chua, the repackaged tax incentives will include an across-the-board lower tax rate for all firms and enhanced net operating loss carry-over (Nolco).
Chua said the CIT rate reduction for all, or the immediate lowering to 25 percent from the current 30 percent, will have a revenue impact of a total of P226.8 billion or P41.96 billion in July 2020 onwards, P89.46 billion in 2021 and P95.36 billion in 2022.
Also included in the CREATE, Chua said, is the longer transition period or additional two years for existing firms receiving incentives. This will cost the government P32.65 billion, or P3.78 billion in July 2020 onwards, P12.55 billion in 2021 and P16.32 billion in 2022.
He said the targeted and timebound tax incentives to support Balik Probinsya, Bagong Pag-asa Program are also included.
Under the CREATE proposal, the Fiscal Incentives Review Board (FIRB) is tasked to improve the governance of tax incentives by tailoring programs to the individual companies’ needs, Chua said.
The original Citira tasked the FIRB, which will be institutionalized, to review and approve all projects seeking incentives from the government. Under the proposal, the Finance Secretary chairs FIRB.
1 comment