Moody’s cites risk of lower revenue from tax measure

A MEASURE that seeks to lower corporate income taxes could buoy Philippine economic recovery through investment flows, but could lower revenue collections in the coming months, according to Moody’s Investors Service.

The global debt watcher said the proposed Corporate Recovery and Tax Incentives for Enterprises Act might worsen already weak state revenue, though tax incentive limits that used to be given in perpetuity would expand the tax base in the long run.

“The passage of the bill will facilitate both domestic and foreign investment, which helps to revive economic growth,” Moody’s said in an e-mailed report. “Uncertainty regarding tax incentives has been cited as a key constraint to higher foreign direct investment inflows in recent years.”

Finance Assistant Secretary Maria Teresa S. Habitan said the measure would cost the government P133.2 billion in foregone revenue this year and P117.6 billion in 2022.

Last year, total government revenue fell by 9.5% to P2.842 trillion from a year earlier amid a coronavirus pandemic. Tax collections accounted for 87.6% of the total.

A bicameral conference committee earlier this month approved a reconciled version of the bill, which was now awaiting President Rodrigo R. Duterte’s signature.

The measure will immediately lower the corporate income tax to 25% from 30% and streamline fiscal incentives for companies.

Moody’s  kept its “Baa2” rating with a stable outlook for the Philippines and signified that the rating was likely to be kept in the next 18 to 24 months.

It also kept its growth forecast for the country at 7% this year, within the 6.5-7.5% estimate given by government economic managers. — Luz Wendy T. Noble

Post A Comment