FINANCE Secretary Carlos G. Dominguez III said the bill lowering corporate income taxes needs to get past the bicameral conference committee by the end of January to allow enough time for companies to file their returns in April with the new rates, some of which apply retroactively to the second half of 2020.
“We hope that the Congress can pass CREATE before the end of January 2021 as this measure is crucial for businesses to continue operating, retain their employees, and create more jobs,” Mr. Dominguez said in a statement on Friday.
Both chambers of Congress took a month-long break on Dec. 19 for the holidays, and will resume regular session on Jan. 18.
The Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) bill forms part of the government’s economic recovery package, featuring a scheme to reduce the corporate income tax rate to 25% effective July 2020, from 30% currently, while streamlining tax incentives to make them more time-bound and performance-based.
“This also provides taxpayers ample time to comply with adjustments to their returns due to the lowering of income taxes effective July 2020 before the tax filing season ends in April 2021,” Mr. Dominguez added.
The measure is expected to cost the government P251 billion in foregone revenue over two years – P133.2 billion this year and P117.6 billion in 2022, if the Senate version prevails in bicam session.
Senate Bill 1357 also provides an outright reduction of corporate income tax for small businesses to 20% starting July 2020 from 30% currently, while all other companies will have their tax rates gradually trimmed by one percentage point each year from 2023 to 2027 until the rate hits 20%.
The House of Representatives approved its version, House Bill 4157, in September 2019, when the measure was still known as the Corporate Income Tax and Incentives Rationalization Act (CITIRA). It was since repositioned as an economic recovery measure during the pandemic.
“CREATE is really about trusting the private sector. Instead of passing funds through what tend to be less efficient government programs, this will leave the money in the private sector’s hands to revitalize their businesses,” Mr. Dominguez said.
Mr. Dominguez said the economic team also hopes lawmakers can pass within the year two more tax reform measures covering the property valuation system and the taxation of passive income and financial intermediaries. — Beatrice M. Laforga