CIT cut to give firms ₱625-B windfall

The planned drastic reduction in corporate tax beginning July this year, once approved by Congress, would unleash ₱625 billion in what could be the government’s largest stimulus for businesses, the Department of Finance (DOF) said.

Finance Assistant Secretary Antonio Joselito G. Lambino II said their proposed corporate income tax (CIT) cut from 30 percent to 25 percent will be equivalent to ₱42 billion in savings for companies in the second semester of the year alone.

Ultimately, the one-time, bigtime reduction in CIT rate, currently the highest in ASEAN, will deliver ₱625-billion record savings for corporations in the next five years, Lambino said.

“It is the largest stimulus package through corporate tax reform in the country’s history. The reform will put more money in the hands of businesses to support their employees and reinvigorate their operations post-ECQ [enhanced community quarantine],” Lambino said.

Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua had said the executive department is amenable to the proposed across the board and immediate cut of CIT to help businesses weather the pandemic-induced economic crisis.

The government estimated that up to 1.5 million jobs will be permanently or temporarily lost to the coronavirus diseases (COVID-19) pandemic.

To help businesses recover faster from the impact of the 2019 pandemic, Lambino said the DOF also will propose to further lower CIT beginning 2023 from 25 percent to 20 percent by 2027.

Finance Secretary Carlos G. Dominguez III earlier said they will submit a repacked second tax reform and change its name from Corporate Income Tax and Incentives Reform Act (CITIRA) to Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

Under the new CREATE bill, the DOF also proposes to extend companies’ net operating loss carryover from three years to five years while losses for this year can be credited to future tax payment.

DOF is also amenable to the proposal to keep the present tax incentives being enjoyed by existing investors for the next four to nine years.

The proposed measure also seeks all incentives for new investors to be targeted, time-bound, and tailor-fitted to proactively attract the right types of investment depending on the demanding.

Dominguez said the DOF expects Congress to pass its revised second tax reform bill, called CREATE, by June and start its implementing on July 1.

The DOF originally proposed, under CITIRA, to reduce the CIT rate from 30 percent to 20 percent in 10 years and rationalize tax incentives.