BUSINESS chambers in Cebu have expressed their full support for the economic team’s proposal to lower the corporate income tax rate to 25 percent by July 2020.
Cebu Chamber of Commerce and Industry president Felix Taguiam said such measure during this pandemic-induced economic crisis will make it easier for the economy to bounce back.
“In this most trying time, the reform in the corporate system through the PH Progreso—its goal of making Philippine recovery with “Equity and Solidarity” is a welcome development for us in the business sector. The government should provide more incentives that will truly benefit and aid the recovery of busineses,” said Taguiam in a statement.
“It is indeed high time for strategies geared towards the nation’s recovery, where the priority will be on income and job restoration,” he added.
Taguiam said, “Lowering the corporate income tax will not only help entrepreneurs and small and medium enterprises recover and thrive, but it will also attract relocating foreign investors in search of resilient, high-growth potential economies like ours, when the quarantine is lifted.”
Mandaue Chamber of Commerce and Industry president Steven Yu echoes the same sentiment, saying that its overall impact will be “positive for the country.”
“It will position us in a more competitive stance among our neighboring Association of Southeast Asian Nations. It will also attract new direct investments from China, Japan and US, among others, and this will encourage existing investors to stay invested in the Philippines,” said Yu on Saturday, May 23, 2020.
The cities of Mandaue and Cebu are expected to reopen their economies on June 1, after the enhanced community quarantine status expires on Sunday, May 31.
Under PH-Progreso all businesses will only need to pay 25 percent of their net taxable income starting July if the measure is approved. This is a big reduction from the current 30 percent rate.
“So currently from the 30 percent corporate income tax, we will reduce it immediately to 25 percent to help the small businesses. We will enhance net operating loss carry over from three to five years so your losses can be credited to the future and effectively lower your tax payments,” said Acting Socioeconomic Planning Secretary Karl Kendrick Chua.
From Citira to Create
Finance Secretary Carlos Dominguez III, meanwhile, called on the Senate to include the economic team’s proposal on immediately cutting the corporate income tax rate to 25 percent starting July, along with other investor-friendly measures, when it opens plenary debates on Package 2 of the Duterte administration’s comprehensive tax reform program.
The economic team renamed the Corporate Income Tax and Incentives Reform Act to Corporate Recovery and Tax Incentives for Enterprises Act (Create).
Dominguez described Create as “one of the largest economic stimulus measures in the country’s history,” given that the measure would free up almost P42 billion in business capital for 2020 alone—and P625 billion over the succeeding five years.
On top of the outright five percent tax cut in 2020, the Create bill also provides for a one percentage point reduction in the corporate income tax each year until 2027, so that the rate will only be 20 percent by that time.
“The large and immediate rate cut in the second half of 2020 also sends a strong signal to the world that the Philippines is positioning itself as a premier investment destination for companies that are looking to diversify their supply chains,” said Dominguez.
He hopes that the Congress will pass the Create bill before it adjourns next month, so that the across-the-board corporate income tax reduction can be implemented by July.
On top of these enhancements, the economic team further explained how existing businesses under Package 2, will continue to benefit from their existing incentives in the short to medium term.
“For existing investors currently enjoying the gross income earned incentive, our proposal is not to change anything in their incentives in the next four to nine years to give them time to adjust to and recover from the coronavirus pandemic. As we keep on repeating, after this initial transition, we are not taking away incentives as businesses can always apply again for incentives under the new regime,” Chua said.
Dominguez projects the country will bounce back in 2021 with a gross domestic product growth rate ranging from 7.1 to 8.1 percent. (KOC)