CITIRA House Bill (HB) No. 4157 or the Corporate Income Tax Rationalization Act Bill was approved on the third and final reading last September 13, 2019. It aims to gradually lower the corporate income tax rate and rationalize corporate tax incentives.
One of the salient provisions of the CITIRA bill will be the gradual reduction of 1% annually of the corporate income tax rate from currently 30%, until it reaches the maximum reduction of 10% in 10 years which in turn, ultimately reduces the corporate tax rate to 20%. This amendment is yet subject to assessment and evaluation for the future possible deficit if any. But the effect will ultimately create more than a million new jobs, according to DoF (Department of Finance), hence encouraging development.
Initially, companies registered under PEZA or (Philippine Export Processing Zone) was granted a 5% tax rate base on their GIE (Gross Income Earned) instead of the national and local taxes, (except real property taxes on land owned by developers) after they have exhausted the income tax holiday ranging from three, four or six years depending on the type of business and grant of the government. Under the newly proposed bill (CITIRA), these benefits would be discarded since there will be soon a uniform corporate tax rate of 20% and PEZA is not exempted on this one. Therefore, there is a high probability of pulling-out the manufacturing firms under PEZA, that leads to several hundred thousand job losses since they will be the one affected on the increase by canceling the perpetual grant of 5% tax base of Gross Income Earned (GIE). It will be a cost on their part and as a businessman/investor, should choose the economically favorable area for investment. PEZA therefore strongly opposed the proposed measure. But worse comes to worst, PEZA hopes for remedy in order not to be so much affected by the incoming law, by granting them an extension of tax incentive or other possible remedies as necessary. As of December 2019, there is an existing proposal in the bill submitted by the Department of Trade and Industry (DTI) that will give them 5-10 years adjustment period.
This newly proposed law which is under the program of the TRAIN Law package will give the advantage of our economy because many Filipinos will surely benefit by entering into the world of employment. It also means the prosperity and development of our country.
However, we should not disregard that there are also foreign investors that impliedly help our economy expand by continuously giving us foreign currency investment. One of our major sources is PEZA, and we must take consideration of their complaints since they give us an advantage in the business industry.
The Congress holds this session until December 21 last year and will resume on January 20 this year.
Let us give this news a little bit of time and hope that this results in a better and prosperous nation – Philippines Mabuhay!