CIT cut to free up P42B this year REVENUE COLLECTION DROPS

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THE proposed reduction in the corporate income tax (CIT) rate to 25 percent by July will free up almost P42 billion in business capital in the second half of the year alone, the Department of Finance (DOF) said.

Carlos Dominguez, DOF secretary, said in a virtual Senate hearing yesterday this will also result in P625 billion freed up over the succeeding five years.

This developed as the DOF yesterday reported that revenue collections as of end-April fell short of target and slid from last year.

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The DOF said the recalibrated Package 2 of the Comprehensive Tax Reform Program will have an immediate across-the-board cut of the corporate income tax rate from 30 to 25 percent starting in July 2020.

“This will be one of the largest economic stimulus measures in the country’s history,” Dominguez said.

“Clearly, this is not an effort to raise taxes, as the package will be decisively revenue-negative. The large and immediate rate cut in the second half of 2020 also sends a strong signal to the world that the Philippines is positioning itself as a premier investment destination for companies that are looking to diversify their supply chains,” he added.

The finance chief said to sustain the efforts of the private sector to recover from the present crisis, part of the proposal is that the CIT rate be reduced further by one percentage point per year starting 2023, until it reaches 20 percent in 2027.

“We are also extending by two years the sunset provision for those under the gross income earned regime, from two to seven years in the current draft to four to nine years,” Dominguez said.

Collections fall short

Collections of the Bureaus of Internal Revenue (BIR) and of the Customs (BOC) between January and April  reached only P706.85 billion, 3.83 percent short of the target of P735.03 billion for that period amid the community quarantine measures that were implemented to address the coronavirus disease 2019 (COVID-19) pandemic.

These  developments also prompted the BIR to extend the deadlines for the filing and payment of income and other taxes to next month.

TThe actual revenues is also 21.49 percent lower than the amount of P900.33 billion collected in the same period last year.

Total collections of the BIR for the first four months of the year dived further to P527.41 billion, which is 25.4 percent below what it collected for the same period last year, and is short by 0.19 percent of the target of P528.44 billion for the January to April period.

As for the BOC, preliminary data show actual collections also fell further to P179.44 billion as of end-April, 7.29 percent lower than the amount of P193.55 billion collected in the same period last year.

The BOC’s revenue for the four-month period is also 13.14 percent short of the target of P206.59 billion.

For April alone, the combined BOC and BIR collections totaled to only P105.75 billion, which is 63.48 percent lower than the amount of P289.6 billion collected for the same period last year.

It is also 19.27 percent lower than the combined BIR and BOC target of P131 billion for that period.

The BIR, which accounts for 78 percent of the state’s tax collection capacity, reported collections of P71.78 billion for the April 1 to 30 period.

Compared to the April 2019 actual collection of P237.93 billion, the amount collected for April 2020 is 69.83 percent short.

In the BOC, collections for the same month amounted to P33.97 billion, which is 34.27 percent below its collection of P51.67 billion in the same period last year.

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It is also 40 percent lower than the target of P56.54 billion.

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