Economic managers fired off the stimulus measures for micro, small and medium enterprises (MSME) by moving forward the timetable for the reduction of the corporate income tax (CIT) rate to 20 percent six years earlier which the business sector lauded as a strategic move.
An immediate reduction of the CIT to 25 percent from the current 30 percent will be implemented in July to key off the accelerated CIT reform schedule.
Businesses complain that the local CIT which is among the highest in Asia-Pacific acts as a deterrent to foreign capital.
Acting Socioeconomic Planning Secretary Karl Kendrick Chua said the CIT rate will be further reduced to 20 percent by 2023 against the earlier plan for a gradual reduction until 2029.
“After the initial reduction to 25 percent, it will resume the reduction in 2023 until it reaches 20 percent. So instead of waiting until 2029, the reduction will be much much earlier,” Chua said during a Financial Executives Institute of the Philippines’ virtual forum.
“In the previous one, you need longer to get to 25 percent,” he quickly added.
Draw for investors
The head of the country’s main group of exporters welcomed the move. Philippine Exporters Confederation Inc. (PHILEXPORT) president Sergio R. Ortiz-Luis Jr. said the ramped up pace of the CIT reduction will attract investors, increase the country’s competitiveness and help address the cash flow issue of MSME.
“In this crisis, this tax reform will particularly be relevant especially to small and medium-sized businesses bleeding from the impact of the lockdowns,” Ortiz-Luis added.
PHILEXPORT trustee for the electronics sector Ferdinand Ferrer, however, raised the need for a status quo on incentives for the next two to three years, allow indirect exporters to avail of value added tax (VAT) exemptions as direct exporters and provide incentives to training for MSME to shift to digital operations.
Liquidity not only way
Chua, also head of the National Economic and Development Authority (NEDA), said there are multiple ways to support local businesses who suffered from the economic fallout brought by the pandemic, particularly those who are engaged in the tourism industry such as hotels.
“We are concerned about the plight of the tourism and the airline industry, especially because they were affected as early as January when the Taal volcano erupted and we think there are multiple ways of supporting them,” Chua explained.
“To some, liquidity would be the way to help them and so liquidity would be the way to help them. Some have problems beyond liquidity. That is why we have a program to infuse capital,” he added.
According to him, infusing capital liquidity will be done on a targeted, time-bound and on a conditional basis.