A LEADER of the House of Representatives has urged the Department of Finance (DOF) to start finalizing Package 2 of the Comprehensive Tax Reform Package (CTRP) focusing on lowering corporate income taxes.
Deputy Speaker Romero S. Quimbo of Marikina City, former chairman of the House Committee on Ways and Means, said lowering corporate income taxes is needed to attract more foreign direct investments.
“[Following the passage at the lower chamber of the Package 1, or the Tax Reform for Acceleration and Inclusion], I also urge the DOF to begin finalizing Package 2 of the tax-reform program so that we can now lower the tax on corporations, which today stands as the highest in our region,” he said.
Last week the lower house approved House Bill (HB) 5636, which seeks to lower personal income-tax rates, expand the value-added tax (VAT) base, adjust excise taxes on petroleum and automobiles, impose excise tax on sugar-sweetened beverages and ease the rates of estate and donor’s taxes.
“Foreign direct investments in the Philippines miserably lag behind our Asean neighbors principally because of our high taxes,” Quimbo added. According to the finance department, the second of four packages of the tax-reform program calls for the reduction of corporate income taxes to 25 percent, from the current 30 percent. Besides decreasing the corporate income taxes, the agency said the measure will also include the rationalization of fiscal incentives of businesses.
In the lower chamber, there are several pending bills seeking to lower corporate income tax and rationalize fiscal incentives.
Quimbo said his HB 2379 will adjust the corporate income-tax rate from 30 percent to 25 percent. The lawmaker said that, with the Asean economic integration, reevaluating the country’s corporate income tax is “critical”.
“Years before the integration, our Asean neighbors—Vietnam, Thailand, Indonesia and Brunei Darussalam—already adjusted their corporate income-tax rates to help achieve a solid footing in the competition,” he said in an earlier statement.
“The average corporate income- tax rate in the Asean region is now 23 percent. Considering our low level of infrastructure, we need to provide favorable tax treatments to attract the investors. And while there may be an immediate reduction in tax revenues, we will have a net revenue gain after about four years due to increased foreign direct investments,” Quimbo added. The tax rate is one of the factors considered by businessmen prior to making investment decisions, said Quimbo, citing a UP School of Economics study.
“It is also the high tax rates that are cited by firms as among the top reasons for the high cost of doing business, according to the Global Competitiveness Report, as observed in the same study,” he said.
Party-list Rep. Bernadette Herrera-Dy ofAng Bagong Henerasyon also filed a separate HB 1537 to reduce corporate income taxes.
“This bill is part of a twin measure to reduce the country’s income tax rates for individuals and corporations, in preparations for the Asean Integration,” she said.
PDP Laban Rep. Bellaflor Angara-Castillo also filed a separate proposal related to the reduction of corporate tax rates.
Meanwhile, Deputy Speaker and AAMBIS-Owa Rep. Sharon Garin filed HB 3359, or the Rationalization of Fiscal Incentives Act, which seeks to help the government attract more foreign direct investments. Garin said the 17th Congress should pass the proposed Rationalization of Fiscal Incentives Act. The bill is currently pending before the House Committee on Ways and Means.
“It is important to reevaluate these incentives given to business, and identify those that will remain and those that need to be done away with. Not only will it avoid redundancy, it will also be able to provide more support to exporting industries, micro, small and medium enterprises, and research and development,” she said.
Under Executive Order 226, also known as the Omnibus Investment Code of 1987, investors are given corporate income-tax holidays for up to eight years.
If enacted, Garin said the measure will balance the “tension” between creating attractive fiscal incentives for domestic and foreign investors and achieving social and economic goals.