No more increase in corporate income taxes this year, says DOF

The Department of Finance (DOF) said there will be no more increase in corporate income taxes this year after the government raised the rate from 30 percent to 35 percent in November last year.

Finance Secretary Margarito B. Teves said yesterday that the DOF would not push for any other major tax measures until it has demonstrated that the Bureau of Internal Revenue (BIR) would be able to deliver its collection target this year.

The Arroyo administration’s revenue reform program has not been completed but the increase in the expanded value-added tax (EVAT) rate from 10 percent to 12 percent is considered a major reform that would significantly increase the government’s revenue base.

Still pending for legislation is the proposed rationalization of the government’s investment incentives program, a package of reforms intended to dramatically reduce the fiscal incentives given to businesses, particularly exporters.

The DOF has also started to study the possibility of reforming the country’s individual income taxation regime to provide outright exemption to low income earners while increasing the income tax rate of high income earners.

The DOF is also asking Congress to lift the fiscal incentives of airline companies and 36 other public and private corporations that cost the government at least P300 billion worth of foregone revenues in one year alone.

The DOF said the government’s complex incentives system has resulted in revenue losses equivalent to 6.97 percent of the annual domestic production, an amount more than enough to wipe out the entire budget deficit.

With ample backing from the International Monetary Fund (IMF), the DOF is pushing for the repeal of at least 40 special laws that granted these incentives in order to recover revenues of up to P12.27 billion a year.

The first sweep would remove the tariff exemptions on imported aircraft fuel currently enjoyed by Philippine Airlines, Cebu Air, Pacific Airways, Air Philippines and Aboitiz Shipping.

The remaining 36 laws would affect mostly government-owned and controlled corporations including the Philippine Amusement and Gaming Corp. (PAGCOR), Philippine Ports Authority (PPA) and the country’s national museums.

According to Teves, however, the DOF wanted to demonstrate to Congress that the government is capable of meeting its target and ensuring revenue protection before going back to legislators to ask for support.

The increase in corporate income taxes last year, according to Teves, would generate about P6 billion in incremental revenues.