Strengthening partnerships in education

Speech for the Coordinating Council of Private Educational Associations of the Philippines (COCOPEA)

By Senator Pia S. Cayetano

Chair, Senate Ways and Means Committee
Sponsor, Republic Act No. 11635, granting preferential tax rates for proprietary educational institutions

Good afternoon, everyone! Thank you for having me and taking time to include me in this event, where you are taking note of the work that we’ve done. Thank you for the very kind introduction.

There’s not much really to say for me on this topic. I won’t go through it as you all know what the law is about. I think what I’d like to do now is to focus on the need for further collaboration between COCOPEA and the legislative side of government.

In my case, there are just so many laws that I feel can be implemented better. Obviously, we would like your input on how we can improve the delivery of education on these issues as well.

This law that we have just passed is evidence of our ability to work together and to address the concerns that you have. I have always said that the private sector, and of course, COCOPEA, is at the lead in terms of the group of members that you have. The private sector is our partner in the delivery of education to the Filipino people.

So your wellbeing is important to us. Because your being able to deliver your mandate effectively also allows us to also deliver our mandate as provided by the Constitution.

I’d like to point out a few issues which I feel are important, because this is just what we have done in the past months. And the outcome of that is really, like I said, just one of the many things that we can do together if we put our minds to it.

I’ll just mention some of these concerns that I have personally taken note of:

•Teen pregnancy

It’s very important that we address this concern. Not just in our country, but all over the world, teen pregnancy is still a big issue. And we already know that when we have teen pregnancies, the victim here is usually the girl because she carries out that pregnancy and her whole future is put on the line. So we must be able to educate our young people and even our teachers. The delivery of education should have that confidence and the ability to address this concern.

•Youth’s exposure to vices

The other item that I wanted to discuss is exposure to vices. Cigarettes and the new hazards, which is vaping, I hope that you can all be on board in raising awareness on the dangers of these products. Vapes are not the safer alternative for young people. There is no safer alternative to young people. It is not correct that I see so many young people thinking that this is safer for them than cigarettes, that is not the case. So I hope you can also be on board in bringing awareness to this. And of course, there is still alcohol and drugs that we need to be conscious of.

•Inclusive learning

And then, of course, there is equal access to those students who have special needs. I know that in a developing country, this really entails costs that are not part of our regular budgeting process. But I hope in due time, we can continue to strengthen our institutions so that we can address the needs of these children with special needs.

•Futures thinking for education

And then very important to me, for those who may not know, I chair a new committee in the Senate, it’s the Committee on Sustainable Development Goals, Innovation, and Futures Thinking. And it is because of my exposure to experts in this field that my knowledge has grown, I continue to be a student in search of more knowledge. But I really embrace the belief that we need to change our system of education. We can’t do it overnight, but every day we must be making steps towards the realization of our goals for these children. And really, there is no one size fits all. The more we can customize the delivery of education for the special talents and (for) the full potential of young learners, the closer we will be to really having a productive next generation.

So that is really the goal, that we are able to shift from the more traditional delivery of education to more understanding of what the special talents are, and the interests and talents these young children are born with, that we develop their skills in communication, collaboration, creativity, and so on and so forth.

•Mental health

And then the awareness on mental health issues. I know we have all become more conscious of it during this time of COVID. These had always been concerns, but there is more acceptance now on the importance of mental health, and not just physical health.

•Sports and fitness

And speaking of physical health, as many of you know, I am an avid sports advocate. I love sports myself, I engage in sports, I encourage sports among everyone of all ages, and I do believe that there is room to increase the role of sports in our curriculum, in our day-to-day life in schools. I know some schools may not have facilities that can provide a venue for all kinds of sports, but in one way or another, there are ways that we can make our children fall in love with physical activities, with being active. Especially in our country, which is gifted with beautiful outdoors. We should be able to do more of that.

So those are just a few of my top-of-mind concerns that I think we can all work with, not necessarily legislation, but really just either implementing existing laws, implementing existing policies, and if there are best practices out there, by all means, share them. We would really like to highlight these best practices in any of the areas that I’ve mentioned, and even more.

So on that note, once again, it’s been a pleasure. I always like working with associations that are very organized, that have their data. Maraming salamat for also making my work easier. So on that note, again thank you for this opportunity to serve our country better. Thank you. #

Education leaders
Senator Pia Cayetano stresses the importance of stronger partnerships in education in her speech before the assembly of private school organizations.
Senate Ways and Means Chair Sen. Pia Cayetano sponsored RA 11635, the law entitling all private schools to the preferential tax rate.

Pia: Bill clarifies private schools’ tax rates under CREATE

Senator Pia S. Cayetano welcomed the passage of Senate Bill No. (SBN) 2407 on third and final reading on Monday (September 27), saying that the measure will clarify that all private schools – both ‘non-profit’ and ‘for profit’ – are entitled to the 1 percent preferential tax rate under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, which was enacted last March.

The Senate Ways and Means Committee Chair and sponsor of SBN 2407, Cayetano acknowledged private school institutions as the government’s “partners in delivering quality education for the youth, and in molding them to become changemakers and responsible leaders of the future.”

“This partnership is even more crucial today as our nation struggles with COVID-19, which has disrupted educational systems and the formal learning of our current generation of students,” Cayetano added.

She noted that many private schools are in a critical state, citing data from the Coordinating Council of Private Educational Associations of the Philippines (COCOPEA) showing that enrollment among its member-schools has declined to 60 percent this school year, compared to 2020.

It may be recalled that in her sponsorship speech, Cayetano recounted the circumstances that led to the filing and approval of the tax relief measure:

•The passage of CREATE (RA 11534) on March 26, 2021, brought reprieve to proprietary educational institutions by lowering their 10% preferential tax rate to 1% for a period of 3 years, specifically from July 1, 2020 until June 30, 2023.

•On April 8, 2021,  the Bureau of Internal Revenue (BIR) issued Revenue Regulation No. (RR) 5-2021, which specifically stated that only ‘non-profit’ proprietary educational institutions can avail of the preferential tax rate under CREATE – basing its policy on previous Supreme Court rulings.

•This then prompted the filing of SBN 2272 by Senator Sonny Angara, which sought to clarify the issue. In the hearing held by the ways and means panel on June 30, 2021, senators asked the Department of Finance (DOF) to suspend implementation of BIR’s RR 5-2021 to avert its impending ill-effects on “for profit” private schools.

•In response, DOF, through a letter to the Senate dated July 21, 2021, gave its commitment to issue the appropriate revenue regulations suspending the relevant provisions of BIR’s RR 5-2021.

•As a result, the BIR issued RR 14-2021, which suspended the inclusion of “for-profit” private schools in the regime of regular income tax.

Cayetano said that it is important to give the public a fair and full picture of the circumstances that led to the filing of Sen. Angara’s SBN 2272, which was substituted by SBN 2407 under her committee report.

She concluded by saying that SBN 2407 will help the Philippines keep track with its goal to ensure quality education, which is part of the government’s commitments to the Sustainable Development Goals (SDGs), particularly SDG 4.

“This is the power of dialogue at work, involving all stakeholders,” said Cayetano, who also chairs the Senate Committee on the SDGs, Innovation, and Futures Thinking.#

Senate session hall
Senator Pia Cayetano: SBN 2407 will clarify that all private schools are entitled to the 1 % preferential tax rate under CREATE

Pia: POGO Tax Law to raise funds for healthcare, SDGs

Senator Pia S. Cayetano today described Republic Act No. 11590 – the newly signed law taxing Philippine Offshore Gaming Operations (POGOs) – as a ‘major win’ for the country because it will generate billions in additional funds for public services, but without burdening Filipino taxpayers.

“For years, many of these POGOS have been operating without paying the proper taxes. By virtue of this law that I sponsored and defended, they will now be taxed,” said Cayetano, chairperson of the Senate Ways and Means Committee and principal sponsor of the POGO Tax Law.

“POGOS are offshore gaming operators. That means only foreigners abroad may gamble in POGOs. So the taxes do not come from Filipinos, or even foreigners residing in the country,” she explained.

“I’d rather tax the POGOs than see a proliferation of gambling in the country, which sadly seems to be the direction that our colleagues in the House are taking with the recent passage of a bill allowing online gambling,” she emphasized.

She further noted that under the new law, 60 percent of total revenues from the gaming tax imposed on offshore gaming companies will be earmarked by the government, and allocated for the following purposes:

•60% for the implementation of the Universal Health Care Act;
•20% for the Health Facilities Enhancement Fund; and
•20% for the attainment of the SDGs, provided that the specific SDG targets shall be determined by NEDA.

“We made sure that the revenues from POGOs will be earmarked for much-needed health programs amid the pandemic, and contribute to the attainment of our Sustainable Development Goals (SDGs),” added the senator, who also chairs the Senate Committee on the SDGs, Innovation, and Futures Thinking.

Based on estimates of the Department of Finance (DOF), Cayetano said RA 11590 is projected to generate P22.9 billion in 2022, through the 5 percent gaming tax imposed on the gross gaming revenues of POGO licensees.

In addition, the government is expected to collect P9.2 billion in 2022 from the 25 percent final withholding tax imposed on foreign POGO employees.

Combined, she said the total projected revenues from RA 11590 would amount to P32.1 billion in 2022. #

Senator Pia Cayetano
Senator Pia Cayetano at the Senate session hall

Sponsorship of the bill clarifying the tax rate for all private schools

By Senator Pia S. Cayetano
Chairperson, Committee on Ways and Means

Mr. President, distinguished colleagues, today, I rise to sponsor and seek your support for the passage of Senate Bill No. 2407, under Committee Report No. 311, which amends Section 27(B) of the National Internal Revenue Code.

Not long ago, this chamber passed the CREATE Act, a measure that serves as our fulfillment to the overdue reforms in the country’s corporate income tax and fiscal incentives system.

In particular, CREATE provided reprieve to proprietary educational institutions in the country by lowering their 10% preferential tax rate to 1% for a period of 3 years, specifically from July 1, 2020 until June 30, 2023.

This was made in keeping with our desire to provide support for our education sector, which has been severely burdened by the disruptions caused by the pandemic. This sector continues to need as much assistance and resources as it can get in order to continue delivering quality education to Filipino learners.

Meanwhile, on 8 April 2021,  the Bureau of Internal Revenue (BIR) issued Revenue Regulation No. 5-2021, which specifically stated that only non-profit proprietary educational institutions can avail of the preferential tax rate under CREATE, basing this on  Supreme Court decisions.

This then prompted the filing of Senate Bill No. 2272 by Senator Sonny Angara, which sought to clarify the issue. During our hearing held on June 30, 2021,  my fellow legislators and I asked the DOF to suspend the implementation of the BIR Revenue Regulation in order to avoid its impending ill effects on the “for profit” private schools.

In response, the DOF, through its letter to the Senate dated 21 July 2021, gave its commitment that in order to ease the burden of taxation among proprietary educational institutions, they shall issue the appropriate revenue regulations suspending the relevant provisions of BIR’s Revenue Regulation No. 5-2021.

As a result, the Bureau issued Revenue Regulation No. 14-2021, which suspended the inclusion of “for-profit” private schools in the regime of regular income tax.

So this Committee Report effectively clarifies that the preferential tax rate of 10% under the NIRC, which was lowered by the CREATE Act to 1% from July 1, 2020 until June 30, 2023, applies to all private schools – putting an end to the debates as to whether  “for-profit” private schools were covered or not.

Private schools are the government’s partners in education. This partnership is even more crucial today, as our nation deals with the COVID-19 pandemic, which has disrupted our educational systems and the formal learning of our current generation of students.

Thank you Mr. President. #

On President Duterte’s certification of CITIRA (SBN 1357) as urgent

Statement of Senator Pia S. Cayetano

Chairperson, Senate Committee on Ways and Means (March 11, 2020)

I welcome President Rodrigo Duterte’s certification as urgent the Senate’s version of the Corporate Income Tax and Incentives Rationalization Act (CITIRA).

This Presidential directive underscores the urgency to forge a more fair, efficient, and accountable tax system – one that should foster a stronger economy amid the many challenges our country is facing.

The certification also affirms the position earlier taken by our top economic managers, finance experts, and various business organizations fully backing SBN 1357.

The Senate version of CITIRA is a result of the successive discussions our committee conducted with investors to address their concerns. And what we repeatedly heard from various stakeholders is that we need to pass this measure.

Like the President, I am hopeful that passing CITIRA will end all uncertainty, assure investors of a more level playing field in terms of doing business in the country, and lead to a brighter and more sustainable future for all Filipinos. #

Senate Ways & Means Chair Pia S. Cayetano holds a press conference in the Senate on February 19, following her sponsorship speech on Senate Bill 1357 (CITIRA bill). She was joined by leaders from government, academe, and business organizations who expressed their full support for the measure.

CITIRA:  A fair deal for business, a winning deal for Filipinos

Sponsorship speech of Senator Pia S. Cayetano

Chairperson, Committee on Ways and Means

February 19, 2020

 

Mr. President, distinguished colleagues, today, I rise to sponsor and seek your support for Senate Bill No. 1357, per Committee Report No. 50, also known as the CITIRA bill, which has 2 main objectives:

 

(1) lowering the corporate income tax rate; and (2) modernizing the tax incentive system, making it more fair, efficient, and accountable.

Mr. President, from the onset let me clarify a major issue. A major source of resistance to this bill is the fear that incentives will be removed once this measure is enacted. This will not be the case, Mr. President. In truth, what we intend to do is to continue a sound incentives scheme, the details of which this representation will explain as we go along.

 

Having said that, allow me to start with a bit of history. 

I am sure that both Senate President Sotto and Senate Minority Leader Drilon, the leaders of both sides of this chamber, would also know from their experience that ever since a bill on rationalizing tax incentives was first proposed in 1995, the Department of Finance and the Department of Trade and Industry have urged Congress to finally make this crucial reform happen.

But even further down memory lane, when I was a college student in the school of Economics of the University of the Philippines, my father, the late Senator Rene Cayetano, was a member of the Batasan and was appointed as the Deputy Minister for Trade and Industry Administrator of the Export Processing Zone Authority otherwise known as EPZA. I had the opportunity to visit the export processing zones in Bataan, Baguio, and Cebu. In fact, my thesis was on fiscal incentives. This was in 1985.

And here we are today in the year 2020. 

Mr. President, in the series of hearings and meetings we conducted, we gave members of the business community, civil society, the academe, government, and business associations the opportunity to share their views in depth. The DOF and the DTI also held their own briefings with key stakeholders. The bill before us is a new and fairer deal between businesses and the Filipino people.

So where are we now and what are we doing? 

We are cognizant that Philippine enterprises are the backbone of the economy and that they contribute to national development by supplying much-needed employment and livelihood. And yet, companies doing business in the Philippines are slapped with a 30 percent corporate income tax rate, the highest in the region.

To address this, we will bring down the Corporate Income Tax rate from 30% to 20% over the next ten years. This should result in some 1.5 million more jobs, a feat I am certain we can accomplish, inso far as we have already provided millions of jobs to the economy. We believe that the reduction of 1% per year, is the pace that does not compromise the country’s vital fiscal resources.

However, Mr. President, we cannot talk about the corporate tax regime without earnestly discussing the tax regime for companies that have received unreviewed, and almost unconditional special tax treatment for decades.

 

From 2015 to 2017, the Philippine government granted more than one trillion pesos in tax incentives in the form of exemptions and tax discounts to various companies. In 2017 alone, the government granted billions of pesos to a select group of some 3,150 businesses. These companies pay an effective rate of 6 to 13 percent of Corporate Income Tax as opposed to other enterprises that pay the regular 30 percent Corporate Income Tax.

Let me make this clear again, I mention the amount of incentives, Mr. President, not to say that we will scrap them. All we want to do is rationalize them.

Incentives should not be given out to any corporation without the proper conditions. They should be performance-based and targeted, and granted in such a way that would benefit the public – by way of providing employment, boosting needed industries, and promoting the growth of less-developed areas in the country.

When we give out incentives on behalf of the people, then we are duty-bound to ascertain that we get what is rightly due to them. That is the essence of this bill: a fair deal for all, and the best deal for Filipinos.

My point, Mr. President, is that true incentives yield results, like the situation with our neighbors, Singapore and Malaysia. If a tax perk is given, without a clear set of conditions, without a time limit, and without adequate oversight, it’s not an incentive. It is a giveaway, and this country cannot afford corporate giveaways.

 

The billions of incentives we granted are equivalent to more than 10 percent of our 2020 national government budget, around 80 percent of DEPED budget, and more than four times the amount allocated to the Department of Health.

 

So let’s discuss tax incentive principles 

With billions of pesos on the line, we need to ensure that the incentives which the government provides are in accordance with the following principles based on international good practices:

 

  1. Performance-based: There should be clear attainment of actual investment, job creation, export, country-side development, and research and development commitments, else incentives will only be wasted. Parang scholarship grant, dapat may resulta, pasado sa exam at maka-graduate.
  2. Targeted: To minimize leakage and to avoid spreading our scarce resources too thinly, tax incentives should be given to activities with significant positive contribution to the economy, or those that really matter for the future, as specified in a strategic investment priority plan (SIPP), to be determined by the Board of Investments (BOI).
  3. Time-bound: There should be a reasonable timeframe for the enjoyment of incentives, and an extension period for companies that perform and contribute to the economy. Parang allowance na binibigay ng magulang sa anak, hindi pwedeng habang-buhay; and
  4. Transparent: Monitoring and evaluation of tax incentives should be institutionalized and reported by the government to the public. Yung pinaghirapang buwis ng ordinaryong taxpayer ang ginagamit nating pampondo sa incentives, kaya nararapat lamang na alam ng taumbayan kung saan napupunta ang buwis niya.

 

And let me add another principle: the incentive system should also be governed well. Currently, there are 13 different investment promotion agencies, or IPAs, each with its own charter and mandate, that offer different menus of incentives to various industries, sometimes not in line with national priorities, and often without the DOF or DTI knowing. As a result, there is no one simple set of incentives that the country may promote to potential investors. This can be very confusing and definitely not investor-friendly.

 

Another concern is that the number of industries that could potentially get incentives from these IPAs, which is some two-thirds of the economy, also makes our incentive system indiscriminately open to just any activity, and thus open to abuse.

 

This representation thus proposes that there be: (1) a set of incentives for different projects or activities, depending on the location and industry, and (2) incentives that shall be based on the Strategic Investment Priority Plan (SIPP), which will be determined by the BOI, in coordination with the Fiscal Incentives Review Board, IPAs, government agencies administering tax incentives, and the private sector. We also propose to expand the functions of the Fiscal Incentives Review Board, a body that currently grants incentives to government-owned or controlled corporations, to also approve all incentives given to private companies, as recommended by the IPAs. We also recommend this board to oversee the IPAs. This much-needed governance reform is at the heart of the CITIRA bill.

Before I proceed with more details of the proposed bill, allow me to acknowledge the work of some of our predecessors such as Senator Recto, who filed the first Fiscal Incentives Review Board expansion bill in 2001 and Senator Drilon, who authored the Tax Incentives Management and Transparency Act, or the TIMTA Law, passed in 2015. The law mandates companies to provide the government with data to estimate the tax incentives they receive, which is now being used to objectively assess our tax incentives. Both senators, along with Senators Lacson and Villar, have also filed in previous congresses bills on fiscal incentives rationalization. We are now building on their ideas to move the reform forward.

 

I would also like to put on record that our team painstakingly took the time to ease the transition period for investors and minimize the drastic changes the new incentive scheme could bring to their businesses.

 

Let me now discuss the salient points of the reform as proposed by this representation.

 

Reduction in the corporate income tax rate 

As mentioned earlier, the corporate income tax rate shall be lowered gradually by one percent every year, from the current 30 to 20 percent by 2029.

We have made the reduction of corporate income tax automatic in our version for the first five years to ensure predictability. By 2025, the reduction can be suspended by the President upon recommendation of the Secretary of Finance, if the projected deficit target as a percent of GDP exceeds the programmed deficit.

 

Modernization of the fiscal incentive system 

The centerpiece of the country’s current tax incentives regime is the income tax holiday or ITH for 4 to 6 years, and the special 5 percent tax on gross income earned, or GIE, in lieu of all taxes, both national and local.

 

The 5 percent tax on GIE is granted forever without conditions, even if the firm does not contribute to the economy in terms of jobs and exports at a level commensurate to the amount of incentives given. Colleagues, no other country gives incentives forever.

 

Dear colleagues, it is time to end a regime that distributes costs to many, and concentrates benefits to a few.

 

Sunset provisions 

After listening to the concerns and apprehensions of existing investor groups that will be affected by this bill, we came up with terms that address their request for a smoother transition period. This addresses our objective, which is to keep companies and investors here in the country while rationalizing the incentives that we give them.

 

For those granted ITH only 

Existing registered activities granted the income tax holiday shall be allowed to complete the remainder of their ITH period.

For those granted 5% GIE but not yet enjoyed

These are the firms with unfinished ITH and a succeeding Gross Income Earned (GIE) of 5%. In their case, their ITH will be allowed to expire on schedule and will be followed by a 5% GIE, with a maximum of 5 years. If the firm has no ITH but is about to go into 5% GIE, they will also enjoy 5% GIE, for a maximum of 5 years.

Granted and currently enjoying 5% GIE forever 

Existing registered activities that were granted the 5 percent tax on GIE, in lieu of all taxes, will be allowed 2 to 7 more years as a transition period, while paying the same rate of 5 percent GIE. The duration of the proposed transition period is as follows:

  • 2 years for those who have been receiving the GIE incentive for more than 10 years;
  • 3 years for those who have been receiving the GIE incentive for between 5 and 10 years;
  • 5 years for those who have been receiving the GIE incentive for below 5 years, and
  • A special 7 years for those that meet any of the following conditions:
  1. Exporting 100 percent of their goods and services, b. Employing at least 10,000 Filipino workers, or c. Engaging in highly footloose activities. And in addition Mr. President, after the sunset period, they will still be allowed to apply under the new incentive package where they will be assessed by virtue of the new package of this bill.

 

What is the new incentives package? 

Under our version of CITIRA, a registered activity may be granted an income tax holiday of 2 to 4 years, followed by a Special Corporate Income Tax (SCIT) rate, that is based on Gross Income Earned (GIE). The Special Corporate Income Tax Rate will be equivalent to 8% GIE for 2020, 9% for 2021, and 10% for 2022 and onwards.

 

Like the current system, this shall be in lieu of all other taxes, and can be availed for 3 to 4 years, depending on the location and activity. This provision preserves the one-stop shop nature of present incentives. We hear the concerns of investors that they do not want to deal with many government agencies when paying taxes. This is why we retained the “in lieu of” provision and one-stop-shop. Based on my discussion with the firms, this particular provision already addresses 90 percent of their concerns.

 

The initial availment of tax incentives, which includes Income Tax Holiday plus the Special Corporate Income Tax Rate is from 5 to 8 years, depending on the category of the registered activity as indicated on the screen. There are three categories: basic, enhanced, and advance. This is our response to the need to make incentives more targeted to locations that need them and industries that we want to promote.

Duration of income tax holiday (ITH) and Special Corporate Income Tax (SCIT), per category 


There is more good news in our version. The availment of Special Corporate Income Tax may be extended by 3 to 4 years at a time or more than once, up to a maximum of 12 years, depending on the category, so long as the firm remains true to its performance commitments.

In lieu of the Special Corporate Income Tax, the registered activity may instead be granted the enhanced deductions shown on the screen subject to the regular prevailing corporate income tax rate. These enhanced deductions incentivize good behavior, such as local job creation, exports, and investment in hi-tech. As proposed by the DTI, our enhanced deductions menu was expanded to include deductions for power costs to account for the country’s challenges in this area. The expanded deductions list is shown on the screen.

Like the ITH and Special Corporate Income Tax (SCIT), the availment of enhanced deduction may be extended also for up to 12 years.

 

To attract the biggest investors, like what Vietnam did with Samsung, the President may give incentives for a longer period of up to 40 years for highly desirable projects, provided that the benefit that the public could derive from such investment is clear and convincing and far outweighs the cost of incentives that will be granted.

 

Governance of fiscal incentives 

To ensure that incentives granted are performance-based, time-bound, targeted, and transparent, the present Fiscal Incentives Review Board’s function is expanded so that it can provide proper oversight over the IPAs, in the same way that the GCG law of 2011 created the Governance Commission on GOCCs to oversee the GOCCs and ensure better performance and accountability.

Under our proposal, the Board will be chaired by the DOF and co-chaired by the DTI, with representatives from the Office of the President, DBM, and NEDA.

 

Let me assure all the officials and employees of the IPAs that we are not abolishing your agencies or cutting down your jobs. IPAs will continue to perform their function of promoting investments in the Philippines, receive and process applications, and recommend to the Fiscal Incentives Review Board worthy incentives for approval by the Board. None of you shall lose your jobs because of this reform. Sec. 9 of Senate Bill No. 1357 provides: The IPAs shall maintain their functions and powers as provided under the special laws governing them except on the approval of incentives.

 

Mr. President, esteemed colleagues, allow me to underscore one final point, and this is the urgency of our task ahead. Let us end the uncertainty.

 

As an economics graduate, Mr. President, I was trained to think of resources, including our fiscal space, as limited. With limited fiscal resources, from the hard work of our countrymen, we must ask ourselves the following questions as we deliberate on this measure:

 

  1. Should we cut taxes for the many, or should we keep conditions loose for the few?
  2. Should we move incentives towards Philippine labor and Philippine products, or should we continue privileges that have gained our economy little value-added?
  3. When we spend our country’s fiscal resources, do we prefer more accountability, or less?

 

On these basic questions of principle, I trust that this Senate of the People has seen the merits of this reform.

 

Further, as part of our commitment to the United Nations 2030 Agenda for Sustainable Development, all efforts must be exerted to achieve the Sustainable Development Goals (SDGs) by 2030. This is the ideal future, a future where there is no poverty, and where our people and economy thrive.

Rationalizing incentives and lowering the corporate income tax will bring in more investments and provide more jobs for Filipinos. This ensures we remain on target with SDG 8, which promotes decent work and economic growth; SDG 9, promoting inclusive and sustainable industrialization and fostering innovation; and of course, SDG 1, which calls for ending poverty in all its forms. This is only the beginning, as working on just one SDG creates a ripple effect on all the other SDGs, especially on hunger, health, education, and equality. A flourishing economy driven by the Filipino people will safeguard the country’s future, even beyond 2030.

 

Dear colleagues, you have appointed me to be chair of the ways and means committee and trusted this representation to study the matter and make recommendations. I humbly ask that you review these proposals, keeping in mind that the greater majority will benefit from the lowering of the corporate income tax and that a rationalized incentives scheme that rewards investments that are result-based will lead to greater prosperity for our nation.

 

Thank you, Mr. President. 

Pia bats for ‘fair, efficient, accountable’ CITIRA

“A fair deal for all. The best deal for Filipinos.”

This was how Senate Ways and Means Chair Pia S. Cayetano described Senate Bill No. 1357, or the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) which she sponsored in plenary on Wednesday.

CITIRA seeks to reduce the corporate income tax (CIT) rate in the country, which is currently among the highest in the ASEAN region, and reform the fiscal incentives system to make it more fair, efficient, and accountable.

Under the bill, the country’s CIT rate will be gradually lowered by one percent every year, from 30 percent to 20 percent by 2030.

The measure will also rationalize fiscal incentives given to firms to make these “performance-based, time-bound, targeted, and transparent.”

The bill intends to prioritize incentives to business activities that generate domestic employment; promote research, development and innovation; promote agribusiness; and invest in areas that are less developed or are recovering from disasters and conflicts, among others.

CITIRA shall likewise offer additional tax deductions to reward corporations’ good behavior, such as local job creation, exports, and investment in high technology.

Meanwhile, the committee is also proposing to implement sunset provisions for firms currently enjoying fiscal incentives to help them transition to the new tax regime under CITIRA.

“After listening to the concerns and apprehensions of existing investor groups that will be affected by this bill, we came up with terms that address their request for a smoother transition period. This addresses our objective, which is to keep companies and investors here in the country while rationalizing the incentives that we give them,” the senator stressed in her speech.

Furthermore, the measure seeks to expand the functions of the Fiscal Incentives Review Board (FIRB), which presently grants incentives to government-owned or controlled corporations. If passed, CITIRA shall mandate the FIRB to approve all incentives, including those given to private companies, as recommended by the different Investment Promotion Agencies (IPAs).

“Currently, there are 13 different IPAs… that offer different menus of incentives to various industries, sometimes not in line with national priorities… There is no one simple set of incentives that the country may promote to potential investors,” Cayetano stressed.

Lastly, the measure allows the Philippine President to grant incentives for a longer period of up to 40 years for highly desirable projects, as long as they will primarily benefit the Filipino public.

“This is the urgency of our task ahead. Let us end the uncertainty (in the business community) by passing CITIRA” Cayetano said. #

Download Sen. Pia Cayetano’s presentation here: CITIRA sponsorship speech ppt

On the recent outlook upgrade for PH by Moody’s and Fitch Ratings

Statement of Senator Pia S. Cayetano
Chair, Committee on Ways and Means
February 18, 2020
The two top international credit rating agencies, first, Fitch Ratings, and now Moody’s have both given the Philippines an outlook upgrade. This signifies an upgrade from stable to positive.
This is good news because it sends a signal to the global business world that the Philippines is now a prime candidate for a credit ratings upgrade, which would mean lower borrowing costs from international creditors, both for the government and private sector investors.
The work I am currently doing on tax reforms in the Senate complements this.
Soon to be sponsored is Corporate Income Tax and Incentives Rationalization Act (CITIRA), which is made up of 2 parts: 1) gradually lowering corporate income tax from 30% to 20%; and 2) rationalizing fiscal incentives.
The  CITIRA committee report I will be sponsoring is a product of numerous hearings and consultations with government representatives and the business sector.  Knowing that we have reached out to all of them and have worked out very favorable terms for existing investors, the groups I have met expressed satisfaction and are now looking forward to the swift passage of the measure once it’s sponsored on the floor.

Pia welcomes multi-sectoral support for PIFITA

Senate Ways and Means Committee Chair Pia S. Cayetano welcomed wide support coming from different stakeholders for the immediate passage of the proposed Passive Income and Financial Intermediary Taxation Act (PIFITA).

The panel on Wednesday (February 12) held its second hearing on ‘Package 4’ of the government’s Comprehensive Tax Reform Program (CTRP), which seeks to make passive income and financial intermediary taxes in the country “simpler, fairer, more efficient, and more regionally competitive.”

During the hearing, various stakeholders from government, business organizations, industry groups, and private companies expressed their support for the measure, with only a few concerns raised regarding specific provisions.

Manifesting general support for PIFITA were representatives from the Bangko Sentral ng Pilipinas (BSP), Bureau of Internal Revenue (BIR), Bureau of the Treasury (BTr), Capital Market Development Council (CMDC), Insurance Commission (IC), Association of Global Custodians (AGC), Philippine Insurers and Reinsurers Association (PIRA), and Philippine Stock Exchange (PSE), among others.

“I am very happy to hear that most [stakeholders] are supportive [of PIFITA], and there are just a few issues that need to be resolved,” Cayetano stressed in an interview on the sidelines of the hearing.

On the other hand, the senator noted that the concerns raised by various sectors would also be taken into account when the committee drafts its version of the bill.

Finance Undersecretary Karl Chua, for his part, said the administration remains open to endorse the amendment of certain provisions that are worrisome for industries.

“When you think of passive income, there are many other areas that are affected, like trust corporations, thrift banks, microfinancing, insurance corporations, non-life and life. The objective of the administration is to simplify it… So we have to hear everybody so that we are sure about the effect on all of these sectors,” Cayetano stressed.

“Ang objective talaga natin is to provide a market so that the Filipino citizens – hindi lang mayayaman kundi ang mahihirap – can invest their money and have access to these markets. Para hindi naman mauubos ng taxation ang kanilang mga iniipon,” she added.

The senator said the panel is planning to conduct at least two technical working groups (TWG) to discuss and address specific concerns on certain provisions of the measure.

“At this point, everything is open. I understand the [stakeholders’] concerns. They want a level playing field. We don’t want to create a situation where we are discouraging investments in certain sectors. So we take note of [those concerns and] we want to study them properly,” Cayetano said.

“We just have to [make] clear with everyone that we can try our best to address their concerns,” she further noted. #

The Senate Ways and Means Committee conducts its second public hearing on the proposed Passive Income and Financial Intermediary Taxation Act (PIFITA).
Finance Undersecretary Karl Chua says the administration is open to studying and endorsing amendments to PIFITA from various stakeholders.
Representatives from government and the financial market sector were invited to state their position on the bill seeking to simplify the tax system covering passive income and financial intermediary investments and transactions.

After sin tax passage: Pia seeks comprehensive approach vs binge drinking, smoking

Following the landmark passage of the Sin Tax Reform Law last week, Senate Ways and Means Chairperson Pia S. Cayetano said she will push for a more comprehensive approach to continue protecting Filipinos’ health and well-being.

President Rodrigo Roa Duterte signed into law last January 22 Republic Act No. 11467, which imposes heavier tax rates on alcohol, heated tobacco products (HTPs), and vapor products.

“Part of the task is to get this law signed. We now have accomplished that. I thank all of the [health] advocates and everybody who spent so much time in helping us see this through,” Cayetano said during a press conference in Intramuros on Tuesday (January 28).

The senator in particular thanked her colleagues in Congress for supporting the provision under the law that mandates the Food and Drug Administration (FDA) to regulate e-cigarette products.

RA 11467 provides for the establishment of a framework for the regulation of HTPs & vapes by the FDA, including banning the sale to non-smokers and persons below 21 years old.

“One of the successful provisions that we have been able to include in this law is for the FDA to regulate these products. And I am very happy about that… We have now provided the legal mechanism for FDA to take the lead,” she stressed.

“The challenge is now with them. And I implore upon all the stakeholders, both on the side of the advocates and the industry, to support FDA to allow them to do their job,” she added.

Meanwhile, Cayetano said the campaign to protect Filipinos from the dangers of sin products should not stop with imposing higher taxes. Taxation, she noted, should be complemented by a comprehensive public health strategy.

“The journey is not over because the effectivity of the law is in its implementation,” she said.

The senator then expressed her commitment to work with her fellow legislators as well as with government agencies and advocacy groups to assess and strengthen the country’s smoking- and drinking-cessation programs.

“I would like to work with our Committee on Health in the Senate and our counterparts in the House to strengthen our existing regulations and, to the extent necessary, [implement] new laws for the protection of our youth against these harmful products – alcohol, HTPs, and vapes,” she stressed.

“I am also calling on the education and health departments, community officials, and parents, [to guard the youth against e-cigarette products]… It is supposed to be for those who want to shift from cigarettes to another product. It is not there to encourage the youth to take on a brand new vice,” the senator concluded. #

Sen Pia Cayetano on e-cigarettes: It is supposed to be for those who want to shift from cigarettes to another product. It is not there to encourage the youth to take on a brand new vice.
Signed into law last January 22, Republic Act No. 11467 imposes heavier tax rates on alcohol, heated tobacco products, and vapor products.