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Philippines progressing with corporate tax reform

Philippines progressing with corporate tax reform

MANILA: Philippines’ corporate income tax rate and overhaul the country’s fiscal incentives has been tabled in the House of Representatives. The changes are part of the second package of the Government’s Comprehensive Tax Reform Program (CTRP). Package 1 of the CTRP, also known as the Tax Reform for Acceleration and Inclusion Act (TRAIN), was signed into law by President Duterte on December 19, 2017. It slashed personal income tax rates while raising additional revenues for infrastructure and social services through the repeal of several “non-essential exemptions” to the value-added tax (VAT); adjustments to excise rates for fuel, coal, and automobiles; and a tax on sugar-sweetened beverages, among other measures. Package 2 will be revenue-neutral, involving a cut in the corporate income tax rate to 25 percent from 30 percent and a review of tax incentives to ensure they are “performance-based, targeted, time-bound, and transparent.” He said that compared to other economies in the Association of Southeast Asian Nations (ASEAN), the Philippines imposes the highest CIT rate but is among those at the bottom in terms of collection efficiency, resulting in a high rate but narrow tax base. The reform is intended to reverse this. Under the Philippines’ tax code, all corporations, unless receiving fiscal incentives, have to pay a regular CIT rate of 30 percent or a minimum CIT rate of two percent of gross income beginning the fourth taxable year immediately following the year in which a corporation commenced its business operations, when the minimum income tax is greater than the regular tax.