DOF urges passage of CITIRA bill before Congress adjourns

MANILA, Philippines — The Department of Finance (DOF) has urged Congress to pass the Corporate Income Tax and Incentives Rationalization Act (CITIRA) bill by March to provide a clearer policy direction and guidance to potential investors in the country.

In a statement, Finance Secretary Carlos Dominguez expressed hope the CITIRA bill would be passed by Congress before the lawmakers adjourn sessions on March 13.

This is despite the earlier pronouncement of Senate President Vicente Sotto III, who said the bill may not likely be passed by the Senate before legislators take their break next month.

Dominguez said the swift passage of the CITIRA bill would enable potential investors to finally drop their “wait-and-see” stance and decide to set up shop here in the Philippines.

Finance Undersecretary Karl Kendrick Chua noted earlier that investors’ hesitance were not caused by the provisions of the bill, but rather the length of time it was talking for Congress to act on the reform.

The CITIRA bill seeks to gradually reduce the corporate income tax from 30 percent to 20 percent and rationalize tax incentives.

The bill, which contains the second package under the government’s Comprehensive Tax Reform Program (CTRP), was approved by the House of Representatives in September last year.

According to the DOF, CITIRA seeks to put in place an improved tax incentives system for enterprises to ensure that they are performance-based, time-bound, targeted and transparent.

Dominguez said this reform would “encourage job creation, upskilling, and linking up small and medium enterprises (SMEs) into the export value chains.”

The finance chief added that CITIRA would overhaul the current tax incentives system, which has given away P441 billion worth of tax perks to only 3,150 companies in 2017.

On the other hand, he said SMEs, who employ a majority of Filipino workers, pay the regular corporate income tax rate of 30 percent, the highest in the region.

He said the government was also cheated of about P63 billion in 2017 by firms who abused transfer pricing rules or shifted profits and costs to reduce their tax liabilities.

Combining the amount of incentives given away and the leakages, Dominguez said the government had P504 billion in foregone revenues during the period because of the current tax incentives system.

Aside from Package 2, the DOF is also pushing for the Congressional approval of two other tax reform measures.

These are Package 3, which seeks to overhaul the land valuation system, and Package 4, which aims to rationalize taxes in the financial sector. Both these packages are currently pending in the Senate.