Business groups back CITIRA with refinements

MANILA, Philippines — Business groups have expressed support for the proposed second package of the government tax reform program, but noted the need to make refinements such as having fixed schedule on reduction in corporate income tax (CIT) rate and a reasonable transition period for firms paying taxes under the gross income earned (GIE) regime.

In a joint statement, the Bankers Association of the Philippines, Cebu Business Club, Federation of Filipino Chinese Chambers of Commerce and Industry, Financial Executives Institute of the Philippines, Foundation for Economic Freedom, Management Association of the Philippines, Organization of Socialized Housing Developers of the Philippines, Subdivision and Housing Developers Association, Tax Management Association of the Philippines, UP School of Economics Alumni Association and Women’s Business Council Philippines  said they back the overall CIT framework proposed under the Corporate Income Tax and Incentive Rationalization Act (CITIRA) bill.

Under the bill, the government would be gradually reducing the CIT rate to 20 percent by 2029 from 30 percent, and rationalize fiscal incentives.

Part of the changes under the CITIRA bill is to remove the five percent tax on GIE which firms registered with the Philippine Economic Zone Authority pay after utilizing income tax holidays.

“The lowering of the CIT rate from 30 percent to 20 percent, although over a long period of 10 years, will eventually put us within the ASEAN (Association of Southeast Asian Nations) range. This will not only make us more competitive in attracting foreign investments, but it will also make our domestic corporates at par with their counterparts, thus making them more competitive as they expand their operations outbound under an integrated ASEAN market,” the groups said.

While the groups recognize that some sectors are against tightening tax incentives, they see the importance of having transparent, performance-based, targeted and time-bound grant of perks.

“We believe in the equitable sharing of tax burden, as we believe in the equitable enjoyment of living in an orderly, healthy, and prosperous society,” the groups said.

In addition, the groups said they also support enhancement and modernization of the tax reporting system through the use of electronic sales reporting system, as such would reduce compliance costs.

While the groups support the CITIRA bill, it is proposing some refinements.

In particular, the groups said the scheduled CIT rate reduction should be fixed and not conditional.

The groups said they also welcome an acceleration of the rate reduction, should fiscal circumstances call for such action.

“Uncertainty is the biggest nightmare in doing business,” the groups said.

On the GIE, the groups propose that the government provides a reasonable fixed transition period for affected firms to enable them to adjust their operations and prevent dislocation.

The CITIRA bill provides a two to five-year transition period for firms, depending on how long they have been paying the GIE.

Amid concerns raised by firms, Trade Secretary Ramon Lopez has said his agency would continue to push for providing a five-year to 10-year transition period.

The groups said they are also supportive of a one-stop shop approach for registered enterprises that would allow them to deal with only one tax agency to avoiding going through difficult processes and different rules of local government units.