Rushing the passage of another tax reform measure or the revised version of the Corporate Income Tax and Incentives Rationalization Act (CITIRA) bill will do more harm than good amid the COVID-19 crisis, an economist professor said Tuesday.
“Let's not rush TRAIN2/CITIRA/CREATE (or whatever they are calling it now) and make an effort to get it done better compared to TRAIN1 and rice tariffication,” Ateneo de Manila University School of Government dean and economist Ronald Mendoza said in a position paper.
The Duterte administration’s economic team has repackaged the CITIRA bill and renamed it Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).
The revised measure aims to reduce corporate income tax to 25% from the current 30% immediately, instead of reducing it in a period of over 10 years under the CITIRA.
Fiscal incentives currently being enjoyed by investors will not be changed in the next four to nine years to give them enough time to adjust to the economic impact of COVID-19.
Mendoza, however, said that pushing more reforms amidst the pandemic “seems like hubris” as many Filipino families are still reeling from the combined effects of poorly executed reform policies in 2018 and 2019,” referring to the Tax Reform for Acceleration and Inclusion law —which reduced personal income taxes but at the same time increased excise taxes on oil, sugary drinks, and sin products —and Rice Tariffication law —which allowed unhampered importation of the staple and reduced farm gate prices of locally-harvested commodity.
The Ateneo dean said reforms were implemented in a “bit of bad timing.”
“For instance, economic reformists ended up implementing TRAIN1 during a period of high fuel prices; and they implemented rice tariffication shortly before droughts struck some of our main rice suppliers in Asia (followed promptly by COVID-19)” Mendoza said.
"And until just a few months back, there was even talk of repealing rice tariffication because of poor execution. Those challenges are still there--only this time eclipsed by a global pandemic," he said.
Finance Secretary Carlos Dominguez III called for the passage of the corporate income tax reform bill before June 3.
The second package of the Duterte administration’s comprehensive tax reform program has been met with opposition from the business community because of its potential to lessen the country’s attractiveness to foreign investors that could eventually lead to thousands of job losses.
The Department of Finance has argued that the government is losing P441 billion in forgone revenues because of the tax incentives. -MDM, GMA News