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NTRC: Reduction of corporate income tax to be staggered.

THE National Tax Research Center (NTRC) said the lowering of the country's corporate income-tax (CIT) rate, part of the government's tax reform, will be done on a staggered basis rather than an outright reduction, to cushion the impact on government coffers.

Based on a tax-research journal published by the NTRC entitled, Comparative Corporate Income Taxation in Asean Member-Countries the state-run think-tank said the reduction in CIT will make the Philippines more competitive with its neighbors in the Association of Southeast Asian Nations.

'The Philippine CIT system is characterized by high rate and a narrow tax base, making it an outlier in the Asean region. A reduction of the CIT rate will make the country on a par with other Asean member-countries in the light of the Asean economic integration. That will put the Philippines in a good position to take advantage of the potential rise in foreign investment opportunities,' the NTRC said.

But the study cautions that any reduction on the CIT be done on a staggered basis and not an outright reduction, to help lessen the impact on government coffers, as a reduction in CIT rates will result in substantial revenue loss.

'Hence, for revenue considerations, in the event that lowering of the CIT is considered, a staggered reduction of the CIT rate is deemed more judicious than outright reduction to cushion the impact of the proposal on government coffers,' it added.

The Philippines currently has a tax rate of 30 percent, which is proposed for reduction to 25 percent under the second package of the Comprehensive Tax Reform Program of the Department of Finance, while harmonizing fiscal incentives given out to businesses.

In the Asean region, the CIT rate for Thailand is at 20 percent, Vietnam imposes a 25-percent rate, Malaysia at 24 percent, Indonesia with 25 percent and Singapore at 17 percent. Lao PDR has a 24-percent CIT rate, Myanmar has 25 percent, Cambodia at 20 percent and Brunei Darussalam with 18.5 percent.

Earlier, Finance Undersecretary Karl Kendrick T. Chua said compared to other economies in the Asean, the Philippines is at the bottom in terms of collection efficiency at 12 percent, despite having a CIT rate of 30 percent.

The study further said CIT collections by the Bureau of Internal Revenue dipped by 20 percent in 2009 to settle at P254 billion with the reduction of the CIT rate from 35 percent to 30 percent alongside the implementation of the reformed value-added tax law. But it was pointed out that CIT collections consistently increased in the succeeding years until 2016 to settle at P534 billion.

'However, despite having the highest CIT rate, the country's CIT effort is lower than those of Malaysia, Thailand and Vietnam. This is basically due to the grant of generous tax incentives by investment promotion agencies such as the Board of Investments [BOI] and the Philippine Economic Zone Authority, among others, to their registered enterprises,' the NTRC said.

The research journal said a total of 18 bills are filed both in the House of Representatives and Senate proposing the reduction of the country's CIT rate, as of February 2018. Six bills are filed at the Senate, while 12 bills are filed in the House of Representatives.

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Publication:Business Mirror (Makati City, Philippines)
Geographic Code:9PHIL
Date:May 17, 2018
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