Pia Cayetano accepts progressive tax on local firms in CREATE bill

Senate Ways and Means Committee chairperson Pia Cayetano on Tuesday accepted the proposal to impose a progressive tax rate on domestic corporations under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill.

Senate President Pro Tempore Ralph Recto said different tax rates should apply depending on the assets and taxable income of domestic firms.

"To assist MSMEs (micro, small, and medium enterprises), if your assets are below P100 million, your tax rate is 20%... If your assets are above P100 million, your taxable rate is 25%," Recto proposed during the period of amendments for the corporate tax reform bill.

Not included in the total assets were the value of the land where the property, plant, and equipment are situated.

The proposed amendment also indicated that if the taxable income was P5 million and below, the tax rate would be 20%. Companies with a taxable income above P5 million shall comply with the 25% tax rate.

Cayetano, the sponsor of the CREATE bill, accepted the proposal, subject to style.

However, she rejected Recto's proposal to mirror the same rates for resident foreign corporations in the Philippines as she cited the concern of the Department of Finance (DOF).

"DOF is explaining that this particular provision is difficult for them to accept. Their problem is it is going to be very difficult to determine the total assets of foreign corporations, and thus their position here is that they only would allow one rate for foreign corporations - 25%," Cayetano said.

Recto said he was amenable to the sponsor's appeal.

The Senate  adopted the amendments in plenary.

If CREATE passes into law, these new corporate tax rates shall be considered in effect starting July 1, 2020.

The original proposal under the CREATE bill was to reduce the corporate income tax rate from the current 30% to 25%.

These would be further lowered by one percentage point every year from 2023 to 2027 until it was down to 20%. — DVM, GMA News