By Charissa Luci-Atienza
The House of Representatives plenary deliberation on the Duterte administration’s corporate tax reform package, branded as Tax Reform for Attracting Better and High- Quality Opportunities is expected on Monday.
Quirino Rep. Dakila Carlo Cua, chairman of the House committee on ways and means, said the substitute bill which his panel approved last week seeking to lower the corporate income tax rates and rationalize fiscal incentives is scheduled for plenary debates.
“Possibly tomorrow (for plenary debates),” he said in a text message, even as he expressed readiness to sponsor and defend the measure in the plenary.
When asked if they can approve the bill on second reading before they go on a break on August 16, Cua said, “It depends on consensus of the plenary.”
Last week, the panel members agreed to rename the second phase of the Comprehensive Tax Reform Program (CTRP) as TRABAHO, as it is expected to create jobs, especially in the countryside.
The still unnumbered substitute measure provides for 2-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 substitute bill proposes that the tax rate shall be 28 percent beginning Jan 1, 2021; 26 percent beginning Jan 1,2023; 24 percent on Jan 1, 2025; 22 percent on Jan 1, 2027 and 20 percent on 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 Secretary of the Department of Finance (DOF).
Cua has expressed hope that the Senate would give the measure a chance as some senators were lukewarm on the corporate tax reform package,
“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,” he said.
Cua said under the 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 there will be zero net effect to veterans and persons with disabilities (PWDs) because the tax burden will be shouldered by the Tax Expenditure Fund (TEF).
Cua also clarified that Speaker 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.
Bayan Muna Rep. Carlos Isagani Zarate said the House leadership is railroading the passage of TRAIN 2, which would only 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,” he said.
Under the bill, failure to file return, supply correct and accurate information, pay tax withhold and remit tax and refund excess taxes withheld on compensation, shall be slapped with a fine ranging from P100,000 to P1.2 million and imprisonment of one year to 10 years. Same fine shall be slapped against any person who attempts to make it appear for any reason that he or another has in fact filed a return or statement, or actually files a return or statement and subsequently withdraws the same return or statement after securing the official receiving seal or stamp of receipt of internal revenue office wherein the same was actually filed.
The substitute bill covers all existing investment promotion agencies (IPAs) as defined in the Tax Code or related laws, and all other IPAs and other similar authorities that may be created by law.
Under the measure, registered projects or activities under the strategic investments priority plan shall be qualified to any of the following incentives: income tax holiday, reduced corporate income tax, depreciation allowance of the assets that is acquired for the entity’s production of goods and services (qualified capital expenditure) and up to 50 percent additional deduction on the increment of direct labor expenses, provided that this does not include indirect labor, salaries, and wages and other personnel costs incurred for administrative and other support services.
The income tax holiday (ITH) shall be granted for a period not exceeding three years, provided that after the expiration of the ITH, the following incentives may be applied for a period not exceeding five years, which includes the period of ITH availment.
A reduced tax rate of 18 percent of the taxable income as defined under Section 31 of this Code, provided, that in the case of registered enterprises within economic zones and freeports the tax shall be paid as follows: 15 percent to the national government, 1.5 percent to be directly remitted to the Treasurer’s Office of the province where the enterprise is located, in lieu of the local business tax, 1.5 percent to be directly remitted to the Treasurer’s Office of the municipality or component city where the enterprise is located, lieu of the local business tax, provided that if the enterprise is under the jurisdiction of a highly urbanized city (HUC), the 3-percent share of the LGU shall be directly remitted to the Treasurer’s Office of the HUC.
The depreciation allowance of the assets that is acquired for the entity’s production of goods and services shall be as follows: 10 percent for buildings and 20 percent for machineries and equipment.
The substitute bill also provides that agribusiness projects or registered enterprises located outside Metro Manila and other urban areas as identified in the strategic investment priority plan shall be entitled to additional two years or incentives, of which one year may be an additional year of income tax holiday.
Projects of registered enterprises locating in less developed areas as identified in the strategic investment priority plan and those recovering from armed conflict or a major disaster as determined by the Office of the President shall be entitled to additional two years of incentive, of which one year may be an additional year of income tax holiday.
Registered actives prior to the effectivity of the proposed Act relocating from Metro Manila and selected areas of Regions 3 and 4-A to other areas of the country shall be entitled to additional two years of incentive, of which one year may be an additional year of income tax holiday.
The bill calls to expand the functions of the Fiscal Incentives Review Board (FIRB), which shall be chaired by the DOF Secretary. The Board shall exercise oversight functions over IPAs, approve the grant of investment tax incentives by the IPAs and to publish the names of the registered enterprises or beneficiaries of tax incentives with approved estimated amount of the corresponding tax incentives. It is also tasked to grant tax subsidies to government-owned and/or -controlled corporations (GOCCs), government instrumentalities, government commissaries, and state universities and colleges (SUCs) as may be provided under the annual General Appropriations Act.