DOF submits Package 2 of CTRP to House

In Photo: This file photo shows people walking by the Department of Finance (DOF) building on Roxas Boulevard, Manila.

The Department of Finance (DOF) has formally submitted to the House of Representatives on Monday the second package of the Duterte administration’s Comprehensive Tax Reform Program (CTRP) that aims to reduce corporate income tax (CIT) rates and “modernize” fiscal incentives.

According to the DOF, the second package of the CTRP was submitted to the House through the Office of the Speaker upon the resumption on January 15 of the second regular session of Congress following its year-end recess.

Finance Undersecretary Karl Kendrick T. Chua said Package 2, which was designed to be “revenue-neutral,” proposes to gradually lower the CIT rate from 30 percent to 25 percent, while modernizing incentives for companies to make these performance-based, targeted, time-bound and transparent.

Through the second package, Chua said the government would be able to ensure that incentives granted to businesses generate jobs, stimulate the economy in the countryside and promote research and development; contain sunset provisions so that tax perks do not last forever; and are reported so the government can determine the magnitude of their costs and benefits to the economy.

Chua added that incentives enjoyed by big businesses, such as income-tax holidays and other perks with no time limits, need to be corrected, as it is costing the government over P300 billion annually in foregone revenues.

Based on 2015 data, income-tax holidays and special rates account for P86.25 billion of the revenue losses, while custom duty exemptions account for P18.4 billion.

In terms of income-tax incentives, the government gave away P61.33 billion to companies in 2011, which went up to P88.17 billion in 2014. “So, in general, the government is giving almost 0.8 percent of GDP in income-tax holidays and custom duty exemptions. Together with the value- added tax [VAT], it is P301 billion, or 2 percent of GDP. These are only the investment incentives,” Chua said. Package 1 of the CTRP, also known as the Tax Reform for Acceleration and Inclusion Act, was signed into law by President Duterte last  December 19.

It slashed personal-income tax rates while raising additional revenues for infrastructure and social services through the repeal of several nonessential exemptions to the VAT; adjustments in the excise-tax rates for fuel, coal and automobiles; and a tax on sugar-sweetened beverages.

Image Credits: Roy Domingo

Suntrust banner2
Turning Points 2018