MANILA – The government stands to lose tens of billions from the proposed reduction in corporate income tax rates under the second package of the tax reform program, which may be offset by rationalizing fiscal incentives, think tank Action for Economic Reforms (AER) said recently.
Under the second tax reform package, the government aims to reduce the corporate income tax to 25 percent from 30 percent making it competitive in Southeast Asia. The package of reforms also intends to rationalize fiscal incentives and plug revenue leaks.
“If we reduce the corporate income tax rate by one percentage point, we stand to lose P23 to P30 billion a year based on 2015 to 2017 data,” AER Industrial Policy coordinator Jenina Joy Chavez said during a forum in Manila.
House Bill (HB) No. 7458 – the version filed by Representatives Dakila Cua, Aurelio Gonzales, and Abu Raneo – proposes to reduce the corporate income tax by 1 percentage point each year starting 2019 until it reaches 20 percent.
Meanwhile, HB No. 7214, filed by representatives Estelita Suansing and Horacio Suansing Jr., lowers the corporate income tax to 25 percent subject to recovering 0.15 percent of the gross domestic product from tax incentives.
Both measures propose to rationalize fiscal incentives by repealing several laws that grant tax holidays, special tax rates, and customs duty exemptions.
AER’s Chavez said rationalizing fiscal incentives will offset potential losses from the corporate income tax cut.
She said hundreds of billions are being given away each year, mostly in favor of large businesses in the form of income tax holidays, special tax rates, and customs duty exemptions. (GMA News)
