Dominguez: Citira opposition comes from “speculation from ignorant people”
The head of the Duterte administration’s economic team on Tuesday, Oct 8, said opposition to the proposed Corporate Income Tax and Incentives Rationalization Act (Citira) was mainly based on wrong speculation, maintaining that the second tax reform package will not cancel any existing fiscal perks being enjoyed by investors.
During The Asset’s 14th Philippine Forum, Finance Secretary Carlos G. Dominguez III was asked if the Philippine Economic Zone Authority (Peza) will really be abolished once Citira becomes law.
Referring to Peza Director-General Charito Plaza, Dominguez responded: “Has she read the proposed legislation?”
“Have you read it?” Dominguez also asked the forum delegate.
“I tell you, we have a lot of speculation from goddamn ignorant people. So let’s read it and see what it says,” Dominguez said.
“It’s all in black and white—it doesn’t say we will cancel this, we will cancel that. We will review essentially all the incentives. Now, does that mean all of it [tax perks] will be cancelled? No! It will be rationalized,” according to Dominguez.
Also, Dominguez shunned calls to reduce the corporate income rate faster than scheduled under Citira as it will bloat the budget deficit and may result in credit rating downgrades.
“I agree that it’s a long period, but we have a choice here—if we drop the rates too quickly, we are going to balloon our deficit,” Dominguez said.
Under CItira, the corporate income tax rate of 30 percent at present—the highest in Asean—will be gradually reduced over a five-year period to 20 percent.
“Ballooning our deficit is going to probably mean a credit downgrade. If a credit downgrade happens, everybody’s interest rate goes up, so what’s the use of it?” Dominguez warned.
The government had programmed a budget deficit ceiling equivalent to 3.2 percent of gross domestic product (GDP) until 2022, as the government wanted to ramp-up spending on public goods and services, especially infrastructure.
“The ideal situation is to keep our deficit in check to around 3.2 percent. And we will do it as fast as we can, reducing taxes if we can offset it against other benefits and tax exemptions that we are giving,” according to Dominguez./TSB