THE House of Representatives, voting 170-8 with 6 abstentions, approved on third and final reading the Corporate Income Tax and Incentives Rationalization Act (Citira), or Package 2 of the Duterte administration's Comprehensive Tax Reform Program.
House Bill 4157, formerly known as Trabaho bill, is the fourth bill passed by the House in the 18th Congress.
It seeks to amend the National Internal Revenue Code and gradually reduce corporate income tax to 20 percent by 2029 from the current 30 percent.
Corporate income tax will be reduced by two percentage points every two years, or 28 percent on January 1, 2021, 26 percent by 2023, 24 percent by 2025, 22 percent by 2027, and 20 percent by 2029.
The measure is seen to benefit mainly the small and medium enterprises (SMEs).
"By lowering corporate income tax, businesses, especially small and medium enterprises, will improve and this will ultimately encourage robust business activities, more investments and more importantly, tax compliance. For the past 50 years, the country has been overly generous in giving special treatment to some investors who have enjoyed this special status," said Representative Estrellita Suansing, one of the principal authors of the bill.
The bills seeks to remove the option for corporations, including resident foreign corporations, to avail of the 15-percent gross income tax.
Corporate taxpayers who enjoy preferential rates, such as regional operating headquarters and offshore banking units, will now have to pay the uniform corporate income tax.
Regional operating headquarters and offshore banking units currently pay 10 percent.
Resident foreign corporations and non-resident foreign corporations, which currently pay 30 percent, will pay the reduced rates.
The bill also aims to provide additional revenues to responsible corporate partners every year.
Assuming they reinvest 50 percent of the tax savings arising from the Citira, House committee on ways and means chairman Joey Salceda said 1.1 million jobs will be created between 2020 and 2029.
The bill also reforms fiscal incentives to "bring in the greatest benefits, such as higher and more dispersed investments, more jobs, and better technology; ensure fairness and transparency in the grant of fiscal incentives; and enhance the accountability of taxpayers through more efficient tax administration."
HB 4157 was approved in substitution of 10 similar bills. (MVI/SunStar Philippines)