THE chairman of the House Committee on Ways and Means said the passage of the Corporate Income Tax and Incentives Rationalization Act (Citira) is the “economic vaccine” to the COVID-19 outbreak.

Albay Rep. Joey Sarte Salceda said delaying Citira will be worse than the worst economic impact of COVID 19.

“Corporate income reduction will be the biggest economic stimulus to offset weakness in demand while resolving the uncertainties surrounding the incentives regime will restart both domestic and foreign direct
investments,” he said.

“At this point, Citira is positioned as a first best policy Rx to cure any possible economic ills of COVID 19,” he added.

The economist-lawmaker earlier released estimates that the delay in passing Citira since it was approved early 2018 in Cabinet may have cost the economy up to $12 billion in forgone foreign direct investments.

According to Salceda, the opportunity costs of not having clear rules now are dramatically larger than whatever loss in investments the opponents of the reform hypothetically claim will be the result of Citira.

“My committee has already expressed the willingness to accept a fiscally sustainable Senate version. We have done our part in speedily passing the reform in the House, and we are ready, willing, and able to do beyond our part if need to be ensure that this reform passes this year,” he said.

“The President’s coalition has the overwhelming majority in the Senate. Let’s finish this before the 2020 Sona, and prove to the people that, as the President’s partners and allies, we are committed to passing his most important economic reform,” he added.

Good news
Meanwhile, Salceda described the recent report from credit rating agency Fitch, which raised the country’s credit outlook from “Stable” to “Positive,” as “validation that tax reform is the way to move the country forward.”

However, the lawmaker said delaying tax reforms is a serious fiscal risk.

Besides Citira, the Passive Income and Financial Intermediaries Tax and the Real Property Valuation and Assessment Reform Act are also pending in the Senate.

“The Fitch Ratings sovereign credit rating report for the Philippines, released last February 28, cites prudent macroeconomic policies as the principal reason for the credit outlook upgrade. My committee, along with our Senate counterpart, and the Department of Finance has worked ceaselessly to move critically needed tax reforms forward. I’m glad our work is being validated positively,” Salceda said.

“Still, the report, while being very good news, carries with it an urgent warning: withdraw from tax reform, or mangle it unrecognizably, and you risk your credit rating,” Salceda said.

The report, while citing tax reform as the principal driver of fiscal stability, warns that “a departure from the policy framework that leads to macro instability, accompanied by deteriorating external indicators, could be negative for the ratings.” The report also warns against “a reversal of reforms.”

“We shouldn’t take the Fitch report as an indication that we have room to somehow mess with our finances. Very clearly, the report is a warning wrapped in good news: finish tax reform, or risk your standing. The House has already done its part. We’re even open to adopting the Senate version as long as it satisfies key fiscal goals. The national interest should be more obvious to those who are nationally elected.” Salceda added.