Exporters are backing a Senate bill that will tax the income of each company based on its ability to pay, similar to how an individual is taxed depending on how poor or rich he or she is.
The Philippine Exporters Confederation Inc. (Philexport) said in a statement last week that they preferred this setup over the one proposed by the Department of Finance (DOF), whereby companies would all pay a uniform corporate income tax (CIT), albeit at a lower rate.
The umbrella group of exporters in the country is referring to Senate Bill No. 595, which will essentially broaden the definition of corporate personhood, or the legal concept that corporations, too, have rights like people do.
The bill, filed by Sen. Ralph Recto back in July, argued that since companies were juridical entities, companies could sue and be sued, to engage in contracts, among other liberties.
Recto wants to extend this corporate personhood to apply in taxation, a process which would take effect immediately if the law is passed, and would impose a CIT range of 5 percent to 25 percent.
“Therefore, it is but proper that for purposes of taxation, a corporation should be treated like an individual. Like an individual taxpayer, a corporate taxpayer should be afforded a system of income taxation based on its ability to pay,” the bill read.
Philexport said the CIT should be immediately reduced “with no condition,” a thinly veiled attack against the DOF’s tax package that would only lower the CIT if it could rationalize the tax incentives offered to thousands of companies.
“This will help MSMEs (micro, small and medium enterprises) enjoy even lower tax rates than the proposed 20-percent CIT [by the DOF],” said Philexport president Sergio Ortiz-Luis Jr.
Under Recto’s bill, a company with a taxable income that does not exceed P400,000 would only pay a CIT of 5 percent. It would go as high as 25 percent, on top of a P1.4-million fee, if the taxable income is more than P8 million.
The DOF is pushing for the Comprehensive Income Tax and Incentive Rationalization Act (Citira) at the Senate. Citira will slowly lower the corporate income tax to 20 percent in 10 years, which many companies welcome since the tax rate is currently one of the highest in Southeast Asia.
But the bill, which was already passed by the House of Representatives, has drawn a lot of criticism for its move to rationalize tax incentives, a move which critics say could lead to massive job cuts. INQ