DOF: Shift to new tax perks regime will take just 5 years
Even with other government agencies promising to work closely to refine the proposed Corporate Income Tax and Incentives Rationalization Act (Citira), the Department of Finance (DOF) is firm the transition period to the new fiscal perks regime will only be five years.
During a recent interview, Finance Undersecretary Antonette Tionko pointed out that House Bill No. 4157—Citira’s version earlier passed by the House of Representatives—provided for the five-year transition period.
The Department of Trade and Industry (DTI), however, wanted a “soft landing,” hence was pushing for up to 10 years before the new incentives system kicks in after Citira’s passage into law.
“I told them that our position is five years,” Tionko said, referring to a previous meeting with the Philippine Economic Zone Authority (Peza), which was initially against restructuring the tax perks.
“That’s in the bill,” Finance Secretary Carlos Dominguez III, for his part, told reporters.
Tionko nonetheless acknowledged the transition period could be “one of the refinements that can be discussed, of course, with consultations.”
Peza Director General Charito Plaza had been adamant against the changes, amid fears investors would be pulling out and shedding jobs when the generous tax breaks being enjoyed by ecozone locators were removed.
Citira would not only rationalize fiscal incentives but also gradually cut the corporate income tax rate to 20 percent from 30 percent at present—the highest in the Association of Southeast Asian Nations.
“Peza adopted the resolution to support Citira. Of course, they’re going to work on refinements together with us and the DTI. You know, it’s just the House version—it’s going to go through refinements, but in principle, they’re supporting it,” Tionko said.
Among other possible refinements that will be discussed by the DOF, the DTI and Peza is the definition of exports. The current system does not include sales to other Peza-registered export-oriented enterprises, according to Tionko.
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