Diokno: OECD's push for 15% corporate tax needs to 'weighed'

Finance Secretary Benjamin Diokno expressed reservations about the proposal of the Organisation for Economic Co-operation and Development (OECD) to establish a global minimum corporate tax rate of 15%.

At a Palace briefing on Tuesday, Diokno said the Philippine government already reduced the corporate income tax (CIT) to 25% from 30% under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

In particular, the CREATE law corporate income tax (CIT) and rationalized fiscal incentives, making it performance-based, time-bound, targeted, and transparent.

The measure reduced the CIT to 25% from 30% effective July 1, 2021, followed by a one-percentage-point cut annually from 2023 until it reaches 20% in 2027.

“So, maybe it’s too early to go to mid-15%. But that’s a good floor… because countries do not want to just lower tax rates to attract investors at the expense of revenues, so that’s a floor,” Diokno said.

The Finance chief added that lowering the country’s CIT further should be looked into thoroughly.

“You will have to weigh whether you can really afford the 15%,” he said.

Last week, the House Committee on Ways and Means approved a bill that would amend the CREATE law and further decrease income tax for domestic and resident foreign corporations from 25% to 20%.

Diokno emphasized that foreign investors do not necessarily decide whether to invest in a country or not due to lower taxes alone.

“In any event, an investor will go to a country not necessarily because of the tax regime. They look at the economic opportunities being made available to them. Another factor will be the availability of labor… We have the youngest populations ‘no, in this part of the world, 25 years old is the median age, so that’s very attractive,” he said.

“So, those are the factors they’re looking into, as well as ease of doing business, power cost,” he added.

The Finance chief said high power cost in the country is among the Philippines’ disadvantages “because in other Asian countries the power cost is subsidized by their governments.” —VAL, GMA Integrated News