By Chino S. Leyco
The Department of Finance (DOF) is firm that Congress should keep the five-year transition period under the proposed reforms to the Philippines’ tax incentives system as endorsed by President Rodrigo R. Duterte.
Finance Secretary Carlos G. Dominguez III (DOF photo / Howard Felipe)
Finance Secretary Carlos G. Dominguez III said that the fiscal authorities are not amenable to the Department of Trade and Industry’s (DTI) suggestion to extend the transition period to up to 10-years for the new tax regime.
Dominguez explained the corporate income tax and incentives rationalization (CITIRA) measure is not a DOF bill but a Duterte administration proposal which wants a shorter transition of only five-years.
“This is not the DOF bill, this is the administration bill. An administration is everybody who is working for the government,” Dominguez told reporters, noting five-years is what in the CITIRA bill approved by President Duterte.
The finance chief added that a five-year grace-period was also the proposal approved by the House of Representatives.
Last month, Trade Secretary Ramon M. Lopez suggested an extended transition period of up to 10 years to “minimize” job losses.
Based on the latest estimate by the DTI presented to the Senate, once CITRA is passed into law and all enterprises under the current tax regime relocate abroad, it would result in 900,000 job losses.
Under the CITIRA bill passed by the lower House, there will be a two to five-year limit on tax perks depending on how long a firm has been enjoying incentives.
“Definitely if we adopt the bill as it is currently structured there is the potential risk, and that is the reason why we are suggesting a softer landing by extending the transition period,” Lopez said.
The trade secretary also stressed that while job losses from CITIRA could not be completely avoided, they “will be drastically minimized” through the longer transition period.
Dominguez said that the DOF, DTI and the Philippine Economic Zone (PEZA) will hold “refinement sessions” for the CITRA bill after the head of the government’s largest investment promotion agency finally threw her support behind the second tax reform measure.
Finance Undersecretary Antonette C. Tionko added that they will also include the Senate during the refinements, noting PEZA Director General Charito B. Plaza’s initial opposition to CITIRA was just a matter of miscommunication.