The lower House’s passage of the higher levy on alcohol and e-cigarettes as well as its ways and means panel’s approval of the proposed new corporate income tax regime augured well to securing another credit rating upgrade for the country within the next two years, the head of the Duterte administration’s economic team said.
“We thank [Albay] Rep. [Joey] Salceda, the sponsors of the Citira bill and members of the House ways and means committee, for heeding the call of President Duterte in his State of the Nation Address (Sona) on the swift approval of this measure, which represents package 2 of the comprehensive tax reform program,” Finance Secretary Carlos G. Dominguez III said in a statement, referring to the approval of the Corporate Income Tax and Incentives Reform Act last week.
Citira will gradually reduce the income tax rate slapped on firms to 20 percent from 30 percent at present—the highest in Asean, while also rationalizing the fiscal perks given to investors.
Finance Undersecretary Karl Kendrick T. Chua last week said the House committee on ways and means was expected to craft the substitute bill for Citira to be tackled in the plenary two weeks from now.
Chua said Salceda, who chairs the House ways and means committee, had committed to pass all the pending tax reform packages by end-September.
According to Chua, the Department of Finance will object to moves in Congress to exempt investment promotion agency Philippine Economic Zone Authority (Peza) from Citira.
Dominguez had also welcomed the House approval on second reading of the bill jacking up the excise taxes slapped on alcoholic drinks, alcopops, heated tobacco products, and vapes last week, which Chua said would generate P17 billion in additional revenue.
The Finance chief was hopeful that passage of the remaining tax packages in Congress would “help bring the Philippines closer to its goal of attaining the coveted ‘A’ investment grade credit rating in two years’ time.”
The Philippines currently enjoys investment-grade credit ratings from the top three debt watchers, namely, Moody’s Investors Service, Fitch Ratings and S&P.
Credit ratings are a measure of a government’s creditworthiness. As the stability of state finances is also related to a country’s performance, credit scores serve as a proxy grade for the economy.
Improved ratings would allow the government to demand lower rates when it borrows from lenders, which could translate to lower interest rates for consumers and businesses borrowing from banks using government-issued debt paper as benchmarks for their loans.