Solon chides Cabinet for stalling CITIRA

Debates and arguments in the Lower House are delaying the passage of the CITIRA bill, a priority measure of the administration.

Albay Rep. Joey Salceda appealed to Cabinet members to settle varying issues with President Rodrigo Duterte and avoid using Congress as playground for policy battles that generate confusions, delay the legislation process and create uncertainties among investors.

Salceda, chair of the House Ways and Means committee, issued the appeal amid hitches in the passage of urgent measures, particularly the Corporate Income Tax and Incentive Rationalization Act or CITIRA, “now on the cusp of being approved in the lower house, but for a single, individually proposed amendment.”

The measure is the second package of the Comprehensive Tax Reform Program (CTRP) which seeks to reduce the corporate income tax rate from 30% to 20% for almost one million businesses in the country, while rationalizing incentives for some 4,100 firms which pay only 5% after not paying any over a period.

In last week’s Cabinet meeting, the President designated CITIRA as the principal national response to the US-China trade war. He approved CITIRA in January 2018 and repeatedly sought its congressional approval in consecutive State of the Nation Addresses, as a national imperative to make the country more competitive.

CITIRA is projected to create 1.566 million jobs and attain an annual incremental Gross Domestic Product growth of 3.6%.

Some Cabinet officials, however, came quite late with their proposals to revise the transition period for the fiscal incentives, causing delays in the bill’s passage in the House.

“I concede you have honest disagreements but please don’t use Congress as playground for your policy battles, or worse, use us as proxies or mercenaries for your skirmishes, because you are all alter egos of only one President,” said Salceda.

After extensive committee deliberations and consultations, macroeconomic, industry and sectoral studies, thousands of pages of position papers’ presentations, the House of the 17th Congress approved it on third and final reading, but unfortunately failed to hurdle the Senate.

Under the CITIRA’s Regular Corporate Income Tax period, the firms’ incentives will depend on their performance.

If they undertake research and development (R/D), train their workers and build infrastructures leading to their factories, expenses for such undertakings will be 100% tax deductible.

If they hire domestic workforce and source local inputs, they will get 50% more deductions for such items.

Salceda said eligible business activities under the preliminary strategic investments priorities plan (SIPP) embrace almost 64% of total GDP.

More so, there is no limit for re-application if they perform well, which effectively lengthens the incentives period but based on performance and government’s chosen priorities.

Freeport zones like Subic and Clark will retain their duty-free status, with zero value-added tax levy for exports.

“These are policy decisions which entail risks but we have studiously examined them with the best data science and analytics, and we have run simulations and built scenarios and we are comfortable that the potential benefits outweigh the risks,” assured Salceda.

“In our most reasonable estimate, CITIRA is good for our country, good for our people and it is the right thing to do. Cabinet members know their options, too. After all the policy noise for almost two years, it is time for them to speak with one voice. We can never perfect legislation but one thing is sure: it is bad to prolong the business uncertainty and the best thing to do is to approve it and allow investors to decide on that basis,” Salceda stressed.