DTI, business group back longer CITIRA transition

The Department of Trade and Industry (DTI) will continue to push for a longer transition period under Package 2 of the tax reform program even as the Department of Finance (DOF) stands pat on a five-year transition period.

Philippine Chamber of Commerce and Industry (PCCI), the country’s largest business group, is also pushing for a longer transition period of 10 years for rationalization of tax perks under the Comprehensive Income Tax and Incentive Rationalization Act (CITIRA) bill.

Trade Secretary Ramon Lopez told reporters on the sidelines of the 45th Philippine Business Conference and Expo organized by the PCCI yesterday that the DTI is holding its ground in pushing for a five to 10-year transition period under the proposed CITIRA bill for firms currently enjoying tax perks.

“For us, we will continue to push for it, five to 10 [years],” he said noting the need to address concerns raised by firms to be affected by the reform.

Various industry groups such as the Philippine Ecozones Association, Semiconductor and Electronics Industries in the Philippines Foundation Inc., Information Technology and Business Process Association of the Philippines, Confederation of Wearable Exporters of the Philippines, as well as the Joint Foreign Chambers of the Philippines have all expressed concern on the CITIRA bill.

“Ideally, we start with five years. Two years, it will be difficult (for firms). It is dangerous for some companies that might leave. Too short a period if two years,” Lopez said.

Approved on third and final reading at the House of the Representatives, the CITIRA bill aims to gradually cut to 20 percent the country’s corporate income tax (CIT) rate considered among the highest in the region at 30 percent.

In addition, the bill will rationalize fiscal incentives granted to investors including the shift from five percent tax on gross income earned by firms registered with the Philippine Economic Zone Authority to the CIT regime.

The bill provides a transition period of two to five years depending on how long firms have been enjoying the GIE benefit.

A longer transition period of 10 years for existing registered enterprises availing of incentives under the CITIRA bill forms part of the resolutions approved by the PCCI to be submitted to President Duterte.

In addition, PCCI is also recommending that the government expedites the lowering of the CIT to 20 percent with no condition to put the country on equal footing with Southeast Asian neighbors.

Earlier this week, Finance Undersecretary Antonette Tionko and Finance Secretary Carlos Dominguez said the agency is firm on a five-year transition period.

“I told them our position is five years. Because that’s what’s in the bill,” Tionko said.

Last week, PEZA director general Charito Plaza who has been opposing the CITIRA changed her tune as she said other agencies have expressed openness to fine-tune some features of the bill.

Lopez said discussions would still be conducted with the DOF and the Senate on the transition period.

“We will still discuss. It’s not yet closed,” he said.