The Corporate Income Tax and Incentives Reform Act (Citira) can serve as stimulus for a post-pandemic economy as it would attract more investments and create jobs, Finance Secretary Carlos G. Dominguez III said.
“We are going to push the Citira bill very hard because, actually, a big part of it is reduction in taxes,” Dominguez told members of the Harvard Business School Alumni Association of the Philippines on Wednesday (April 29).
“That way, we are prepared to help everybody across the board,” he said. “So that, I think, could be a big stimulus to the economy.”
He said one of the most misunderstood provisions of Citira was on incentives. “People misunderstand. They think we want to remove incentives,” Dominguez said.
“Actually we don’t want to. We want to make them more targeted,” he said.
In a nutshell, Citira was aimed at making tax incentives more rational while reducing income tax rates on businesses from 30 percent, highest in Southeast Asia, to 20 percent.
The House of Representatives had already passed Citira but it continued to languish in the Senate amid fears by some senators that investors may flee if tax perks were reduced or removed and lead to job losses.
Dominguez said targeted incentives would be better than giving these indiscriminately which hasn’t worked in drawing more investors.
He said COVID-19-related stimulus packages were not likely to pass through Congress “very easily.”
The Citira bill, he said, “is a stimulus bill because it reduces taxes for everyone—whether or not you were hit by COVID-19.”
“Everyone was hit but others were worse,” he said. He said he was encouraging Congress to “please pass the Citira bill because of tax incentives there that can act as stimulus to the economy.”
“You want a stimulus? There is a bill—it has been sitting in the Senate for the last six months,” Dominguez added.
Last week, Dominguez said that the Department of Finance (DOF) was studying possible tweaks to Citira in light of the socioeconomic fallout inflicted by the COVID-19 pandemic.
One proposal was allowing the Fiscal Incentives Review Board “the flexibility of tailoring programs to the needs of individual companies,” he said.
The DOF-led board currently grants tax subsidies only to state-run companies. Citira seeks to change that, allowing the board to approve investor tax perks. The bill also turns the board into an oversight body for incentives in 13 investment areas.
Asked if the DOF may also seek to defer the gradual reduction in corporate income taxes under Citira as the government now struggled to collect revenues amid the pandemic, Dominguez replied last week: “Still under study.”
Edited by TSB
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