The corporate income tax reform now being pursued by the government is seen to invite more foreign investments into the country, a tax expert said.
Raymond Abrea, president of Asian Consulting Group, the reform is a welcome development for both local and foreign corporations.
“Our income tax will be more competitive across Asia Pacific region, especially after lowering personal income tax under the package 1 of TRAIN law,” the tax expert told The FREEMAN.
“I fully support the lowering of corporate income tax from 30 percent to 25 percent or even 20 percent since our ASEAN neighbor countries are also lowering corporate income tax down to 15 percent,” Abrea explained.
Equally important, he also raised the need to rationalize the country’s fiscal incentives extended to select-industries and economic zones so it will uphold a fair and just tax system among all corporations.
“Definitely, it will encourage more foreign investments and boost economic activities as more domestic corporations will have passive investments to expand their business operations,” Abrea explained.
In the end, more taxes will be collected for the government, he added.
The tax reform advocate is also looking forward to the approval of TRAIN’s Package 1A in Congress next month.
“I’m referring to the general and estate tax amnesty which will help erring taxpayers to pay their back deficiency taxes from undeclared income and estate,” he said.
“This will not only increase collections without the traditional BIR audit which is prone to compromises or harassment, it will also allow BIR to focus on its other priority programs like industry profiling, risk-based audit, broadening taxpayer base, automation of tax administration and compliance including accreditation of third party software providers and mobile applications to improve the experience of taxpaying public in filing and paying their taxes,” Abrea further explained.
Corporate tax reform comprises Package 2 of the Duterte administration’s Comprehensive Tax Reform Program (CTRP).
The Department of Finance is targeting to introduce this year the rest of the CTRP packages that mainly cover property and capital income taxation.
HB 7458, authored by Deputy Speaker Raneo Abu, Deputy Majority Leader Aurelio Gonzales and Rep. Dakila Carlo Cua, who chairs the House ways and means committee, was filed last March 20. It is expected to be referred to the appropriate committee that will deliberate on the measure when the Congress resumes session on May 14.
The bill provides for a one-percentage point reduction in the current 30 percent CIT every year for domestic corporations, resident foreign corporations and non-resident foreign corporations starting 2019, provided that the cut would not reach lower than 20 percent, while modernizing fiscal incentives to make them performance-based, targeted, time bound, and transparent.
Similar to the version proposed by DOF and Department of Trade and Industry, the bill also aims to formulate a three-year Strategic Investments Priority Plan (SIPP) to ensure that only industries that provide positive spillover to the economy, based on rigorous cost-benefit analysis, are given incentives.
This article was originally published on The Freeman.