Philexport supports graduated corporate income tax

MANILA, Philippines — The Philippine Exporters Confederation Inc. (Philexport) is pushing for a graduated corporate income tax (CIT) system, saying this will be a game changer for micro, small and medium enterprises (MSMEs).

Oscar Barrera, trustee for the chemicals sector of Philexport,  said the implementation of a graduated CIT system would be beneficial to MSMEs.

He said the system could be “a game changer for the MSMEs as it would give them more breathing space in terms of cash flow” and “energize MSMEs and encourage them to expand their business.”

“This scheme should also assist entrepreneurial Filipinos and make them more cost-competitive locally and internationally,” he said.

Philexport is of the view the current tax regime has placed Philippine companies in an uneven playing field with their Southeast Asian counterparts.

The country’s umbrella group of exporters is supporting Senate Bill 595 filed by Sen. Ralph Recto which seeks to apply segmented tax rates according to companies’ taxable income instead of a single income tax rate.

Under the bill, the CIT rate would be reduced from the current single rate of 30 percent to a graduated rate ranging from five percent to 25 percent. 

Currently, the Philippines has the highest CIT rate in Southeast Asia.

Graduated CIT is also being implemented in other Southeast Asian countries.

Another bill concerning the reduction of the CIT called the Comprehensive Income Tax and Incentives Rationalization Act (CITIRA) is also being pushed by the government.

Under the CITIRA bill approved on third and final reading by the House of Representatives, the CIT rate would be gradually reduced to 20 percent from 30 percent over a 10 year period as fiscal incentives given to investors are rationalized. 

As part of the rationalization of fiscal incentives, the five percent tax on gross income paid by firms registered with the Philippine Economic Zone Authority in lieu of all national and local taxes after the income tax holidays have been used up, would be removed.