Business groups, exporters want corporate income tax cut to 20% by 2025

BUSINESS GROUPS and exporters are asking Congress to consider a longer transition period from the current tax incentives system and to accelerate the corporate income tax cut, in an effort to restore fiscal certainty to investors amid the pandemic.

Six foreign chambers and four other business groups on May 27 wrote a letter to Sen. Pilar Juliana S. Cayetano, the chairperson of the Committee on Ways and Means, to express their support for the reduction of corporate income tax (CIT) to 25% from 30% by July, and to propose the CIT be cut to 20% as soon as 2025.

The Senate is currently tackling the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act which accelerates CIT reduction from the earlier proposal of a gradual reduction to 20% over a decade under the previous version called Corporate Income Tax and Incentives

Rationalization Act (CITIRA).

Under CREATE, CIT will remain at 25% up to 2022, before lowering at one percent each year until it reaches 20% by 2027.

The groups asked for an additional five years to retain existing tax incentives, in addition to the sunset provisions. CREATE allows for a four- to nine-year sunset period.

The previous incentives scheme allowed companies to pay 5% tax on gross income earned, in lieu of other national and local taxes.

The business groups also said the 5% tax on gross income earned can be maintained after the sunset provision, if companies continue to meet conditions such as exporting 90% of its output and employing at least 10,000 people.

GRAVE CONCERN

The groups expressed “grave concern” about the Finance department’s proposal to tailor-fit incentives, saying it will aggravate apprehension from foreign investors that do not know what