By Charissa Luci-Atienza, August 8 2018; Manila Bulletin
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The House Committee on Ways and Means approved Tuesday the administration’s second tax reform package that seeks to lower the corporate income tax rates and rationalize fiscal incentives.
After more than two hours of deliberations, the panel, chaired by Quirino Rep. DakilaCua, passed the still unnumbered measure that provides for two-percent cuts in the corporate income tax every two years from January 1, 2021 to January 1, 2029.
From the current 30-percent corporate income tax rate, the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO bill) proposes a reduction in the tax rate of 28 percent beginning Jan 1, 2021; 26 percent beginning Jan 1,2023; 24 percent starting Jan 1, 2025; 22 percent starting Jan 1, 2027; and 20 percent starting Jan 1, 2029.
The bill provides that the President may advance the scheduled reduction in the corporate income tax rate when adequate savings are realized from the rationalization of fiscal incentives, as certified by the Finance Secretary.
Cua said the bill will be called the “TRABAHO bill”because the measure is expected to create jobs, especially in the countryside. He expressed hope that the Senate would give the measure a chance as some senators appeared lukewarm on the government’s second tax reform package.
“Ang goal podito ay to create jobs by attracting the right set of investments through incentives so I think pagnakitanamannilayung new version. Of course, the senators, the Senate can always improve what we’ve worked on. Maybe they will see that this will indeed create more jobs,” Cuatold reporters.
The measure has been endorsed for plenary discussions and approval.
Cua said under the TRABAHO bill, the investors who expand their business can continue to enjoy their incentives longer than the transition period.
“Hopefully those who are really performing and creating jobs will expand and therefore enjoy longer incentives,” he said.
He also assured that exemptions currently enjoyed by persons with disabilities (PWDs) “will remain.” In addition, PWDs will be given subsidy and vouchers through the tax expenditure fund.
Cua said it is up to the House Committee on Rules, chaired by House Majority Floor Leader and Camarines Sur Rep. Rolando “Nonoy” Andaya Jr. to calendar the bill for plenary deliberations and passage.
Cua said Speaker Gloria Macapagal Arroyo did not micromanage the details of the bill. “She left the details to the members of the committee in consultation with the Finance Department,” he said.
“The Speaker, she attended the TWG (technical working group) for several hours, marathon TWG last Sunday so you can feel her dedication and sincerity in pursuing this TRABAHO law,” Cua noted.
During the hearing, Canadian Chamber of Commerce of the Philippines president Julian Payne proposed that the corporate income tax reduction should start in 2019 “to stimulate more investments.”
Finance Undersecretary Karl Kendrick Chua said they are “open” to early imposition of reduced corporate income tax but the agency needsa lead time of two years to offset the losses.
He said they project a P62 billion revenue loss from the implementation of the two-percent corporate income tax cut in 2021.
He also warned that the country’s “fiscal situation will be very bad” if they would give in to proposed implementation of one-percent corporate income tax cut every year in 10 years starting next year.
Meanwhile, Bayan Muna Rep. Carlos Isagani Zarate said, “The approval of TRAIN 2 (referring to TRABAHO bill) bodes ill for consumers since any tax or cancellation of tax incentives of companies would be passed on to consumers. Its approval is also insensitive especially now that inflation for July has reached a staggering 5.7 percent and prices continue to increase,” he said.
He warned that passage of the measure would spell price increases in more goods and services and would drive the inflation rate to higher levels.
“To reduce inflation and for prices to go down it would be best to repeal the anti-people TRAIN law and junk the other TRAIN proposals,” Zarate said.