September 12, 2019
THE high number of foreign investment pledges in the first half of the year proves that investors do not fear the proposed reduction of corporate income tax (CIT) and rationalization of incentives under the government’s Comprehensive Tax Reform Program (CTRP), a senior official of the Department of Finance (DoF) said.
“Despite the persistent fear-mongering activities of certain groups, the international investment community continues to signal its confidence in the policies of the Duterte administration and in the strength of the Philippine economy and its workforce, as illustrated by the surge in FDI [foreign direct investment] pledges in the year’s first semester,” Finance Undersecretary Karl Kendrick Chua was quoted as saying by the DoF in a statement on Wednesday.
Citing data from the Philippine Statistics Authority (PSA), the Finance department said these pledges in the second quarter amounted to P49.58 billion, up 60.2 percent from P30.95 billion a year ago.
This boost the P46 billion worth of pledges in the first quarter, bringing total pledges in the January-to-June period to more than double the amount last year.
The report is based on data from six of the seven investment promotion agencies (IPAs): Board of Investments (BoI), Philippine Economic Zone Authority, Clark Development Corp., Subic Bay Metropolitan Authority, Authority of the Freeport Area of Bataan, BoI-Autonomous Region in Muslim Mindanao, and Cagayan Economic Zone Authority.
“It goes to show that the noisy naysayers against the long-due efforts to reform the country’s convoluted corporate income tax system are mistaken,” Chua said.
The reduction of CIT from 30 percent to 20 percent in 10 years and the streamlining of fiscal incentives were proposed under House Bill 4157, or the Corporate Income Tax and Incentives Rationalization Act (Citira), which was approved on second reading by the House of Representatives on Monday night.
In his State of the Nation Address in July, President Rodrigo Duterte urged Congress to pass the measure, as well as the other remaining CTRP packages. He said the bill would energize the country’s micro, small and medium enterprises (MSMEs) and allow them to expand their business and hopefully generate 104 million jobs in the coming years.
Finance Secretary Carlos Dominguez 3rd has said Citira would boost MSME growth because under the current corporate taxation system, 3,150 corporations registered under IPAs enjoy discounted effective CIT rates of 6 to 13 percent.
On the other hand, he noted that small and medium-sized businesses, which employ a majority of Filipino workers, pay the regular tax rate of 30 percent, the highest in the region.
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