‘CIT reduction can’t be done hastily’

He said rationalizing the incentives basically mean addressing investor concerns.

There is no urgency in reducing the corporate income tax (CIT) rate as quickly as possible or the economy suffers as a consequence.

According to the Department of Finance, the proposed reduction under the Comprehensive Tax Reform Program (CTRP) still awaits legislative approval and should not be hastily cut to avoid unwanted events from happening to the economic landscape.

Finance Secretary Carlos Dominguez III said an abrupt reduction in the CIT as structured at present will have dire consequences.

“If we drop the rates too quickly, we are going to balloon our deficit and ballooning our deficit is going to probably mean a credit downgrade. If a credit downgrade happens, everybody’s interest rate goes up,” Dominguez said.

According to him, what government needs to do is keep the budget deficit in check at the target 3.2 percent of local output measured as the gross domestic product (GDP) for the year.

“The ideal situation is to keep the deficit in check to around 3.2 percent. We will do it as fast as we can, reduce taxes if we can (and) offset it against other benefits (and) other tax exemptions that we are giving,” the Finance chief quickly added.

He said rationalizing the incentives basically mean addressing investor concerns.

“Number one, they want to see stability in policy. Number two, they want to see fairness in the legal system. They want to (guarantee) the safety of their personnel. They want to see improvements in infrastructure and lower costs and finally, they want to see what incentives there are,” Dominguez explained.

The proposed reduction in CIT under the CTRP’s second package dubbed as the Corporate Income Tax and Incentives Rationalization Act (CITIRA) aims to rrationalize the current corporate incentive structure.

Also, he said CITIRA’s critics are “ignorant people” who have not read the proposal.

“What’s going to happen is that the fiscal incentives, if you read the law, is that there will be a review, a body that’s going to review all of the fiscal incentives granted by all the different agencies. That’s all,” he said.

“I tell you we have a lot of speculation from ignorant people. There’s so much speculation (when) it’s all in black and white. It doesn’t say we will cancel this or we will cancel that. We will review essentially all the incentives. That means it will be rationalized,” he reiterated.

The country’s CIT at 30 percent is the highest relative to peers in the region. This was seen reduced to only 20 percent by 2025 under the CITIRA and imposed not all at once but over a five-year period.