Amid lawmakers’ proposals to pass a stimulus package in Congress to prime the economy, Finance Secretary Carlos G. Dominguez III instead pushed for the passage of the pending Corporate Income Tax and Incentives Rationalization Act (Citira), saying that this will provide a needed boost to industries and businesses gouged by the pandemic-induced lockdowns.
This, as Dominguez expressed doubt that the proposed stimulus bill would be passed immediately, considering the length of time it takes to have all the hearings from the House to the Senate.
The country’s finance chief also said they are going to push Citira bill “very hard,” considering that the reduction in corporate income taxes that the bill provides would be a “good stimulus to the economy.”
Speaking at “The New Normal” webinar hosted by the Harvard Business School Alumni Association of the Philippines on Wednesday, Dominguez said, “You want a stimulus? There is a bill. It’s been sitting in the Senate for the last six months. Why don’t we get that passed and you have immediately a tax stimulus in place?”
He added: “They are trying to pass legislation for the stimulus bill and that legislation is not going to pass very easily. You have all the hearings that you have to do in the House, pass it in the House and you have to go to the Senate. Right now, we have the Citira bill, passed in the House and sitting in the Senate. This is a stimulus bill because it reduces taxes whether or not you are hit by the Covid virus,” he said.
“There is already a bill so I am going to encourage them to please pass the Citira bill particularly because of the tax incentive there that will in fact act as a stimulus to the economy,” the DOF chief stressed.
Dominguez also shut down criticisms on the Citira bill, saying a lot of people misunderstood it, referring to oft-repeated fears from investors, especially in export processing zones, that the rationalization of incentives would drive them out of business or out of the country.
Dominguez explained they are not removing incentives but making these “targeted” specifically for industries.
He said the government’s current incentive system accounted for why the Philippines was left behind by other countries.
“Why do we keep on doing the same thing? Why don’t we make a targeted program tailor-fit to the companies who we want to come here?” he said.
“That is what we want to do in Citira but of course, all they really want to talk about is how some companies are going to suffer. Companies who have been here for 40 years, receiving tax incentives which, frankly, I don’t think they deserve. I mean if you’re sucking on the tit after 40 years, maybe you should grow up,” he added.
The Citira seeks to gradually lower CIT to 20 percent by 2029, from 30 percent at present. On the other hand, it will overhaul the current menu of tax perks enjoyed by economic zone firms, including the 5-percent tax on gross income paid in lieu of all local and national taxes. These incentives are what keeps the Philippines competitive against Southeast Asian competitors in the face of high logistics and energy cost here, critics of the bill have said.
No bailout
In the same webinar, Dominguez also said the government has so far no plans to bail out financially troubled companies even amid the economic fallout from the pandemic.
Dominguez said he is “not comfortable that the government has any talent to decide what kind of investments are made in what industry especially using taxpayers’ money.”
He added: “I am also asked about government financial assistance to companies who are having problems. Right now, actually we do not have any plan to bail out anybody, to invest taxpayers’ money in companies that have gotten into trouble,” he said.
“What we will do, however, is we will ask the Monetary Board and the BSP (Bangko Sentral ng Pilipinas) to support banks who support their clients so the credit decision will still remain with the private sector in the banks,” he added.
Economist-lawmaker Albay 2nd District Rep. Joey Salceda has proposed a stimulus bill which consists of programs with a gross fiscal cost of P1.65 trillion from 2020 to 2023.
He also wants the government to mandate the Land Bank of the Philippines and the Development Bank of the Philippines to carry out stimulus loans and repurpose the National Development Co. (NDC) as its bailout agency.
Salceda is proposing that NDC bail out firms that would go bankrupt due to the coronavirus pandemic.
Source: https://businessmirror.com.ph/2020/04/29/dof-chief-pass-citira-its-the-best-stimulus/