DTI welcomes proposals to reduce corporate income tax

MANILA, Philippines —The Department of Trade and Industry has expressed openness to study a proposal that seeks to immediately reduce corporate income tax (CIT) in a bid to make  it at par with its  Southeast Asian neighbors.

Trade Secretary Ramon Lopez said the DTI would study the Philippine Exporters Confederation Inc.’s (Philexport) position on Senate Bill 595 filed by Sen. Ralph Recto in the context of the Comprehensive Income Tax and Incentives Rationalization Act (CITIRA).

 “If linked to CITIRA, it might work. I have to formulate the position,” Lopez said.

SB 595 seeks to replace the single income tax rate with a graduated income tax schedule for corporate tax payers similar to individual tax payers.

The bill seeks to lower the CIT from the current single rate of 30 percent with a graduated rate ranging from five percent to 25 percent.

At present, the Philippines has the highest CIT rate at 30 percent in Southeast Asia.

Within the Southeast Asian region, the average CIT rate is 22.4 percent.

Philexport president Sergio Ortiz Luis Jr.  said the group is supporting the bill as this would help micro, small and medium enterprises (MSMEs) to enjoy even lower tax rates than the proposed 20-percent CIT under the CITIRA bill.

Under the CITIRA bill approved on third and final reading by the House of Representatives, the CIT rate would be gradually reduced to 20 percent from 30 percent over a 10 year period as fiscal incentives given to investors are rationalized.

Part of the rationalization of fiscal incentives is the removal of the five percent tax on gross income earned by firms registered with the Philippine Economic Zone Authority (PEZA) in lieu of all national and local taxes after the income tax holidays have been used up.

Concerns have been raised on the CITIRA bill by PEZA-registered firms, citing possible job losses.