DTI seeks longer CITIRA transition

The Department of Trade and Industry (DTI) suggested on Tuesday that the proposed reforms to the Philippines’ tax incentives system should have a longer transition period to “minimize” job losses.

In a statement, DTI Secretary Ramon Lopez said that he is proposing a transition period of up to 10 years for the new tax regime as under the Corporate Income Tax and Incentives Rationalization Act (CITIRA) passed by the House of Representatives, there will be a two to five-year limit on tax perks depending on how long a firm has been enjoying incentives.

Lopez added that the proposition is needed for industries which could easily relocate their operations to other countries as without a longer transition period, jobs could be lost as these businesses shut down.

“Definitely if we adopt the bill as it is currently structured there is the potential risk, and that is the reason why we are suggesting a softer landing by extending the transition period,” Lopez said.

The Trade secretary also stressed that while job losses from CITIRA could not be completely avoided, they “will be drastically minimized” through the longer transition period and proposed to hike the tax on gross income earned (GIE) to seven percent from five percent at present.

The GIE tax is an incentive that is paid in lieu of all national and local taxes.

The Trade and Finance Departments are already working on the possible changes, Lopez said.

To recall, exporters and the BPO sector have opposed the rationalization of incentives saying it may lead firms to shut down or abandon expansion plans but the government stressed that businesses will get “superior” incentives from the tax reform bill.

The tax bill, which was certified as urgent by President Rodrigo Duterte, seeks to lower corporate income taxes to 20 percent from 30 percent.