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Revenue loss feared under 2nd tax reform

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The second tax reform package was supposed to be revenue-neutral, with foregone revenues from a cut in corporate income tax rates covered by a corresponding removal of fiscal incentives deemed redundant.

THE HOUSE of Representatives’ version of the second tax reform package could yield a net revenue loss for at least two years, a senior Finance official has warned.

Finance Undersecretary Karl Kendrick T. Chua noted that while the corporate income tax cut to 20% from 30% will be automatic though gradual, reduction of fiscal incentives deemed redundant will start only two years after the envisioned law takes effect.

House Bill No. 7458 filed on March 21 by Reps. Dakila Carlo E. Cua of Quirino; Aurelio D. Gonzales, Jr. of Pampanga’s third district and Raneo E. Abu of Batangas’ second district provides for a percentage point cut yearly without the Finance department’s condition that each cut be premised on a corresponding revenue increase from clipped perks.

“It will be a loss because the reduction in the corporate income tax rate is automatic. However, our rationalization in fiscal incentives begins two years later because of the two-year transition. So in the first two years, 2019 and 2020, it’s a definite loss,” Mr. Chua told reporters on Tuesday last week.

“Our estimate is P30 billion in 2019 and P67 billion in 2020,” Mr. Chua added.

“And then in 2021, the loss will be P113 billion. However the rationalization will kick in, so that loss will be much lower.” — EJCT