I vote No to the CITIRA Bill for the following overriding reasons:
1. The CITIRA Bill (HB 4157) is a classic example of how skewed the Philippine tax system is against the poor. On December 19, 2017 the TRAIN Act (Tax Reform for Acceleration and Inclusion) was approved into law which imposes the ultimate burden of cascading excise taxes on petroleum products and sweetened foodstuffs on consumers, the great number of whom are the poor, disadvantaged, and marginalized.
The TRAIN Act even imposes new excise taxes on LPG and kerosene of which the poor are the primary consumers.
In fact, the TRAIN Act contributed to the high inflation rates last year.
Verily, CITIRA favors artificial beings owned by the rich, while the TRAIN Law burdens human beings, principally the poor.
2. In contrast to the TRAIN Act, the CITIRA Bill seeks to liberate corporations, both domestic and foreign, as well as giant firms and multinational corporations, from the current corporate income tax (CIT) of 30% to only 20% in a period of 10 years. No less than the Sponsoring Committee admitted that the government is going to forfeit a trillion pesos in 10 years in foregone revenues.
The Sponsoring Committee also admitted that due to corruption, tax evasion, tax avoidance and tax incentives, the effective corporate income tax is much lower than the current 30%. The reduction of the CIT rate will further exacerbate the effective tax rate.
3. To deodorize CITIRA’s unequitable partiality to the rich, it is propagandized that CITIRA would purportedly (a) generate employment, and (b) attract investments. These are overstated, and even contrived.
4. The CITIRA Bill is a replica of House Bill No. 8083 in the 17thCongress whose moniker was the TRABAHO Bill. This “Trabaho” brand was abandoned by the current House Bill No. 4157 which is labeled CITIRA. This is an indirect admission that CITIRA will not generate employment even as the Explanatory Note to the CITIRA Bill does not mention the generation of jobs. The Sponsoring Committee’s suggestion that the savings that corporations will obtain due to the reduction of their income tax rate will be channeled to recruitment and employment of more workers is at most speculative. The Sponsoring Committee admitted that the Government has no control over what corporations would do with their windfall savings consequent to their corporate income tax reduction. These savings will more likely be considered by corporations as additional profit for the dividend distribution or for repatriation as the case may be.
5. The rate of corporate income tax is not one of the major factors which attracts or discourages investment. The Sponsoring Committee admitted that tax regime ranks only number six (6) after the prime factors of (1) ease of doing business, (2) adequacy of infrastructure, (3) policy of predictability, (4) cost of power, and (5) internet speed.
With respect to the “ease of doing business”, the Philippines is ranked number 124 out of 190 countries according to the World Bank. No amount of CIT reduction would attract more investments if the Philippines fails to improve considerably its poor ranking on business efficiency.
In the report of the World Bank shown by the Sponsoring Committee, the rate of CIT does not even figure in the top 10 factors in the Philippine setting.
Moreover, it is significant to note that many countries in the top 15 countries globally receiving direct foreign investment inflows have corporate income tax rates similar to the Philippines at 30% or even higher like India (35%), Brazil (34%) and France (31%). Again, the Sponsoring Committee admitted that there is no direct correlation between the corporate income tax rate and the inflow of foreign investments.
Incidentally, ING Bank senior economist Nicholas Mapa said that the latest surge of investment pledges “may point to continued confidence in the prospects of the Philippine economy with or without the implementation of CITIRA.” On the other hand, it must be noted that foreign direct investment inflows dropped 48.5% in June due to factors of which CITIRA is irrelevant.
6. The second part of the CITIRA Bill on rationalization of fiscal incentives even reduces employment or may trigger capital flight. Moreover, with the provisions on numerous exceptions to the reduction or removal of fiscal incentives, it is possible that at the end of the day more fiscal incentives may be in place so much so that more revenues may be lost.
7. Finally, the inclusion in one bill of two subject matters, namely reduction of corporate income tax and rationalization of fiscal incentives, violates the constitutional provision in Section 26 (1) of Article VI of the Constitution that: “Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof.”