By BERNIE CAHILES-MAGKILAT
Once passed, the Corporate Income Tax and Incentives Rationalization Act (CITIRA) bill is expected to bring in $12 billion in foreign direct investments (FDI) on the first year of its implementation to recover the $12-billion FDI loss in the past two years due to its delayed passage, according to Rep. Joey Sarte Salceda, chairman of the House Committee on Ways and Means.
As the country’s top economic analyst before he joined politics in his hometown in Bicol, Salceda told reporters after his speech at the Makati Business Club (MBC) that the Philippines lost $12 billion in FDI inflows in the last two years because of the non-passage of the CITIRA Bill. President Duterte approved the CITIRA bill at the Cabinet level in January 2018.
Salceda also expressed willingness to adapt the Senate version of the CITIRA, which is the second package of the government’s comprehensive tax reform program for the immediate passage of the bill. With that, he expects the bill to get passed next week.
“I will accept, I will adopt the Senate version so there will be no bicameral and the bill becomes a law,” he said.
The Albay representative stressed he was even ready to adopt the points of disagreement with the Senate on the bill just to have it passed, including the 50 percent deduction on power cost to investors. He had this reservation on this Senate additional enhanced tax perks to investors because of the social concern associated with power cost and its impact on the poor.
If passed the CITIRA’s enhanced features include depreciation allowance of qualified expenditure of 10 percent for buildings, 20 percent for machineries.
There will be additional deduction of up to 100 percent for research and development and training, 50 percent for labor expense, 100 percent for country wide infrastructure development, 50 percent for reinvestment allowance to industry and 50 percent for domestic manufacturing.
In addition, the CITIRA will also allow enhanced net operating loss carry over for five years, exemption from Customs duty on imported capital equipment, raw materials and spare parts.
The corporate income tax will also be reduced gradually to 20 percent until 2030 from the current 30 percent.
Salceda, however, was firmed on the removal of the perpetual 5 percent tax on gross income earned on economic zone locators in lieu of all national taxes stressing “there is no such as forever.” He, likewise, thumbed down the proposal of the Philippine Economic Zone Authority to adopt the grandfather rule saying that locators can renew “forever” their incentives based on activities or expansion of existing operations.
Actually, he said, many investors prefer the CITIRA. He told the existing investors, “This is a good deal.”
Overall, the CITIRA Bill has put strong bias on countryside development as it puts more emphasis on gross value addition.
“There is a complete unmitigated bias for countryside development that is clear message of CITIRA,” he said.
Only those industries or activities identified under the government’s Strategic Investment Priorities Plan (SIPP) will be eligible for government tax incentives. SIPP will not grant incentives to activities such as retail and all property developments except socialized mass housing projects. Industries under SIPP, he said, account for 65 percent of the GDP.