Reduced corporate tax bill to create 1.6 million jobs — lawmakers

MANILA, Philippines — A proposed law reducing income tax on thousands of corporations could create more than one million new jobs over the 10-year reduction period, the measure’s principal authors said yesterday.

“The Corporate Income Tax and Incentives Reform Act or CITIRA bill, when enacted, will create 1.6 million jobs, and add gross domestic product growth of 1.1 percent in 2020 and 3.6 percent annually starting in 2021,” Albay Rep. Joey Salceda, who chairs the House of Representatives ways and means committee, said.

“It will have a positive footprint on almost every sector of our economy. It rearranges our economic structure by lowering the income tax on one million small and medium enterprises (SMEs), which employ most of our labor force, while rationalizing tax incentives of 3,100 corporations and make them perform,” he said.

Another principal author, Deputy Speaker Mikee Romero of 1-Pacman, who is an economist like Salceda, said the substantial reduction in corporate income tax “will lead to more job opportunities and income for our people.”

“It would mean that businesses would have more investible income that they could use for expansion or for starting new ventures. That in turn would mean more jobs and workers’ income,” he said.

He said the incentives rationalization proposal favors the countryside, where tax privileges would be enjoyed longer than in Metro Manila.

“Hopefully, that would entice businesses to relocate to the provinces, leading to rural development,” Romero stressed.

Salceda said CITIRA “is the most significant economic legislation after the 1987 Constitution.

He said the current taxation system is grossly unfair to SMEs, which pay 30-percent income tax, while corporations enjoying tax exemptions, which include those among the country’s top 500 companies, are levied an effective rate of only six percent to 13 percent.

He said CITIRA would equalize the playing field by prescribing a uniform income tax rate, which would go down from 30 percent to 20 percent over 10 years starting next year.

“President Duterte, in a recent Cabinet meeting, pointed to CITIRA as the principal national response to the US-China trade war. By reducing corporate income tax, we are mobilizing the dynamism and efficiency, productivity, and innovation of the domestic corporate sector,” he added.

Salceda pointed out that corporations are expected to invest their savings from reduced income tax in business expansion, development of new markets and research and development (R and D) programs.

“CITIRA offers the most attractive incentive package in the region, but no forever, no loopholes for transfer pricing and incentives will be based on performance, not promises,” he stressed.

He said the Philippines is the only country in the Association of Southeast Asian Nations region that allows tax exemption beneficiaries to enjoy these privileges forever.

He said under CITIRA, incentives would be linked to “outcomes we desire, like more jobs, use of more domestic content, more workers’ training, and more R and D.”

The House approved the reduced corporate income tax bill on third and final reading on Friday. The secretariat was directed to immediate send it to the Senate.

It was the third revenue measure the chamber passed under the leadership of Speaker Alan Peter Cayetano in less than two months since the 18th Congress convened last July 22.

The first sought to increase levies on beer and other alcohol products, while the second proposed to cut the tax on interest earnings from 20 percent to 15 percent.

Leaders of the House and the Senate and the executive branch represented by Executive Secretary Salvador Medialdea had agreed on the passage of these and other tax bills in a meeting in Malacañang last month.