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3RD AND FINAL READING

House approves bill lowering corporate income tax to 20%


The House of Representatives on Friday has approved on third and final reading a measure lowering the corporate income tax rate to 20% from 30% over a period of 10 years.

Casting 170 “Yes” votes, against eight “No” votes and six abstentions, lawmakers approved the Corporate Income Tax and Incentive Rationalization Act (CITIRA).

The proposed measure is expected to generate investment as well as 87% in tax savings that corporations can use to expand business and conduct research and development. It is also seen to generate around 1.5 million jobs.

CITIRA is one of the priority bills of the Duterte administration, but Philippine Economic Zone Authority (PEZA) Director General Charito “Ching” Plaza is not in favor of the measure.

Plaza has argued that businesses under PEZA, which are largely export-oriented industries, should be exempted from the measure because of its negative impact on tried and tested and globally competitive tax incentives of PEZA.

“CITIRA is a major incentives revamp. Hence, it is dangerous to test on exporters who are efficiency-seekers and have chosen PEZA carefully to invest their huge capital because of its globally competitive, tried, proven, and tested incentives,” Plaza said in a separate statement.

“PEZA’s tax incentives are not perpetual and not given to companies per se but to every product, technology and expansion because they serve to encourage companies to upgrade their products, bring in new technologies and expand their operations,” Plaza added.

CITIRA law author and Albay lawmaker Joey Salceda said the measure will lead to better productivity, considering that it covers at least 3,100 corporations.

The law is expected to add 1.1% to the gross domestic product growth in the first year and 3.6% annually from 2020 to 2030, while adding only 0.9% to inflation.

“Incentives will be based on performance, not promises,” Salceda said in a separate statement.

Opposition lawmaker Edcel Lagman, also of Albay, noted the tax reforms consequences are completely opposite to what the government and other lawmakers are saying.

CITIRA’s promises of employment generation and attracting investment are overstated, if not contrived, because the government has no control over what corporations would do with their windfall savings resulting from a lower corporate income tax, Lagman noted.

“These savings will more likely be considered by corporations as additional profit for the dividend distribution or for repatriation as the case may be,” he added.

The corporate income tax is not a major factor attracting or discouraging investment for it boils down to ease of doing business, adequacy of infrastructure, policy of predictability, cost of electricity, and internet speed, Lagman emphasized. —VDS, GMA News

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