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Conclusion
ON the legislative end, the proposed Corporate Income Tax and Incentives Rationalization Act (Citira) was approved by the House of Representatives in House Bill 4157 in September 2019 and endorsed to the Senate. The Senate Ways and Means Committee released Committee Report 50 dated February 17, 2020, endorsing Senate Bill 1357, in substitution of SBs 535, 595 and 702. This is now pending in second reading in the Senate.
On May 14 during the Sulong Pilipinas forum, Neda Secretary Karl Kendrick Chua disclosed that the government is pushing for the repackaging of the Citira with proposals contained in the proposed Corporate Recovery and Tax Incentives for Enterprises Act.
The proposals under CREATE include the immediate reduction of the corporate income tax from 30 percent to 25 percent; a longer transition period of additional two years for existing firms that are receiving fiscal incentives; giving the Fiscal Incentives Review Board the mandate to improve the governance of tax incentives by tailor fitting these to the individual companies’ needs; and, an enhanced net operating loss carry. It is estimated that there will be a revenue loss of P240.1 billion for the period until 2022.
If CREATE will be pursued, this can be taken up in the bicameral deliberations of the two chambers after the Senate approves the Citira.
In the same forum, Secretary Chua also presented several proposals for new as well as increased taxes. The government is studying the taxation of non-residents engaged in the digital economy; health sin tax measures; and, increase in tariff on imported fuel.
Secretary Chua also mentioned that the government is supporting the proposed bills of Representative Joey Salceda pertaining to increasing the motor vehicle tax and taxation of Philippine Offshore Gaming Operators. These measures will generate P94.9 billion of tax revenues for the period until 2022.
The CREATE will bring relief to businesses that have been battered by the Covid-19 pandemic. This will also attract foreign investors, including Japanese firms that will be leaving China after the recent $2.4 billion economic stimulus package announced by the Japanese government.
While there is increased interest and initiative on passing measures that will improve the fiscal position and ability of our government, lawmakers should also consider legislating measures that will further protect taxpayer rights and improve tax administration. The structural changes that may be enacted will provide institutional enhancement and process improvement in the tax system. This, in turn, will result in better tax administration and increased collections without passing new tax laws or increasing existing impositions.
Things are looking good for our tax system in the new normal.
Joel L. Tan-Torres is the Dean of the University of the Philippines Virata School of Business. He was the former Commissioner of the Bureau of Internal Revenue, the chairman of the Professional Regulatory Board of Accountancy and partner of Reyes Tacandong & Co. and the SyCip Gorres and Velayo & Co. He is a Certified Public Accountant who garnered No. 1 in the CPA Board Examination of May 1979.
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