The proposals encased in package 2 of the Comprehensive Tax Refom Law, now called the Corporate Income Tax and Incentives Reform Act (CITIRA) Law could achieve much lower tax rates for all businesses to as low as 20% from the current 30%.
It also seeks to make tax incentives more uniform, increasing conpetititveness of local firms since they will enjoy the same incentives offered to foreign companies.
This is good for the majority of businesses classified as Micro Small and Medium Scale Enterprises (MSMEs), which effectively constitute 98% of our economic enterprises.
This is essentially a boost for them. This is especially a boost for us in the countrysides, as most of us are MSMEs.
Added to this, with procedures making this simpler in TRAIN 1, particularly the 8% flat tax on gross income, paying taxes has also become easier.
No longer must we be burdened with voluminous and confusing forms. We can thus expect more businesses to plan their tax payments better, and pay the right taxes.
In the end, there is better tax collection which allows more government revenue.
With the earlier TRAIN 1 reform of exempting majority from paying individual income taxes more money is unleashed into the financial system.
What does this mean for the economy as a whole?
With a young population and new tax system that delivers more and better revenue while letting more income into the market due to lower tax rates, we can expect more money in the financial system, possibly lower interest rates, creating a greater demand for products and services in the economy which will drive more business expansion.
This makes our economic growth more robust, and strengthens our credit ratings.
With respect to our country’s debt, better growth and a stronger tax system ensure that we can pay our debts better, which allows better loan payment terms to continue. This, in turn can allow us to finance the infrastructure we need to pish our growth further, the same way Thailand and Malaysia has, and Indonesia is currently doing.
Davao is conpetititve
Congratulations to Davao on being adjudged Third most competitive Local government, and the only one outside Luzon to achieve this.
With further reforms such as the full implementation of the Ease of Doing Business Law, we hope that many of our permit procedures will become easier, online transactions rather than the tedious process where fixers and consultants were often required.
With the jump of 25 places in our ease of doing business in the world, such reforms force us to improve our processes.
This is what helps make an economy competititive.
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