EDITORIAL - Reviving business

As the country prepares to ease quarantine measures, lawmakers are set to pass the second package of tax reforms. Malacañang has already jumped the gun on Congress. Invoking special powers under the state of public health emergency, President Duterte has approved an additional 10 percent tariff on petroleum imports.

With Congress resuming sessions this week through teleconferencing, several senators have expressed support for the passage of the Corporate Income Tax and Incentives Reform Act. The House of Representatives passed its version of the CITIRA bill in September last year.

A key feature of CITIRA is the lowering of corporate income tax from 30 percent to 20, making the rate competitive with those of other Southeast Asian countries. At 30 percent, the Philippines has the highest corporate income tax in the region. Proponents point out that the lowering will benefit approximately 99 percent of companies in the Philippines, mostly micro, small and medium enterprises that employ millions of people.

At the same time, CITIRA aims to end the tax incentives given to 3,150 mostly large companies, as part of a planned rationalization of business incentives. Many of those companies are in special economic zones, which employ hundreds of thousands of Filipinos. The Philippine Economic Zone Authority, which had initially opposed CITIRA for fear that PEZA locators might move to other countries such as Vietnam, is now seeking a deferment of the passage of the law during the pandemic.

CITIRA defenders argue that tax incentives cannot be enjoyed forever. They appear ready to take the risk of losing PEZA locators in favor of assisting MSMEs. No doubt, MSMEs will welcome the lower corporate income tax and any other incentives or assistance that they might get from the government as the coronavirus pandemic continues to devastate businesses.

When even overseas Filipino workers are returning en masse, however, adding to the ranks of those rendered jobless or underemployed by the pandemic in the country, the possibility of losing more jobs that mostly pay well in the economic zones cannot be ignored.

The country is competing for job-generating investments with neighbors that offer much lower power costs, better infrastructure, more efficient business regulation, reliable enforcement of contracts, and fewer restrictions on foreign ownership. If the administration is bent on the passage of CITIRA, it must be complemented with intensified efforts to address those issues.