Gov’t to study shift to gross income taxation

The Duterte administration plans to form a group that would study the proposal to use gross income as basis in the computing corporate taxes to minimize corruption, the Department of Finance (DOF) said yesterday.

Finance Secretary Carlos G. Dominguez III said that President Rodrigo R. Duterte’s proposal to shift the basis of corporate tax from net income to gross revenues will be considered by the

economic team and other departments.

“There is a recommendation to form a group headed by the Executive Secretary and participated by the Department of Justice and Development Budget Coordination Committee to study this issue,” Dominguez told reporters in a mobile phone message.

On Thursday, Duterte said that by changing the basis of corporate tax to gross income would immediately eradicate corruption in the Bureau of Internal Revenue (BIR), the government’s main tax agency, by about 70 percent.

According to the President, Hong Kong, Singapore, Brunei, among others have been using this tax computation that eliminated the need for tax examiners who usually benefit from the net income tax scheme.

“I am challenging everybody. You want to stop corruption especially in BIR? We go gross. Leave the net [taxation],” Duterte said in his speech during the inauguration of Bataan government center and business hub.

“I guarantee you: If we adopt gross [taxation], there will be no examiners,” Duterte added. In the Philippines, corporate earnings were levied after all expenses have been deducted from sales.

A finance official, who declined to be identified, meanwhile, said that shifting the corporate taxation to gross income was “easier said than done.”

Currently, there is DOF bill pending in Congress seeking to reduce the country’s corporate income tax (CIT) rate on a staggered basis from the current 30 percent to 20 percent. This is part of the Duterte administration’s comprehensive tax reform program.