MANILA (Reuters) - Philippine lawmakers backed a reduction in the corporate tax rate and removal of unnecessary tax incentives in a final vote on a key legislation, which the government says would attract investment and create much-needed jobs.
Voting 170 to eight with six abstentions, the lower house of Congress, dominated by President Rodrigo Duterte’s allies, passed on the third and final reading a bill that would slash the corporate income tax from 30%, currently the highest in the region, to 20% by 2029.
The bill is among the tax reform measures Duterte is pushing to help fund his infrastructure program and make the tax system fairer and simpler.
Cutting the corporate income tax rate would boost the Philippines’ competitiveness, the government has said, and benefit the country’s more than 90,000 micro, small and medium enterprises, which in 2017 employed close to 5 million people.
The bill, which must now go to the Senate, will also rationalize fiscal incentives to ensure that only qualified companies would be granted tax relief.
Congressman Joey Salceda, the bill’s principal author, said the legislation, once passed into law, will create more than a million jobs and add 1.1% to GDP growth in its first year of implementation. The bill, he said, is part of the country’s “national response to the U.S.-China trade war”.
In 2017, the government forewent 441 billion pesos ($8.48 billion) in revenues because of tax breaks deemed unnecessary or ineffective, the Department of Finance has said.
“Incentives are not entitlements, but privileges that must be earned,” the Department of Finance has said in a presentation to Congress last month.
Reporting by Karen Lema