MANILA – The proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) will not put to waste incentives being extended to businesses unlike in the past, thus a win-win situation for both the businesses and the government.
This was stressed by Finance Secretary Carlos Dominguez III in a virtual briefing Tuesday, adding only the industries that authorities consider will have greater impact on the economy will be prioritized.
“You only want the companies that will fit what you want to happen in the Philippines,” he said.
The government wants to reform the country’s tax system to make it more competitive in the region and to correct the incentives system, which economic managers said have been taken advantage of by some businessmen.
Dominguez said CREATE addresses these issues because it ensures that the incentives to be given to investors are performance-based, time-bound, targeted, and transparent.
He said the crisis caused by the coronavirus diseases 2019 (Covid-19) pandemic “allowed us to see more clearly our country’s strengths and weaknesses.”
If the proposed law is approved before Congress’ session ends on June 3, the law will take effect by July and this will lower the corporate income tax (CIT) from 30 percent to 25 percent.
This rate will be reduced by one percentage point annually until it goes down to 20 percent by 2027.
The CREATE bill also targets to extend the sunset period for current incentives beneficiaries from two to seven years based on the earlier proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) to four to nine years to alleviate the pandemic’s impact on businesses.
Dominguez, however, clarified that incentives recipients may shift to the new tax regime immediately if they think that it is more favorable for them.
He admitted this measure is revenue eroding but added this will be “the largest fiscal stimulus program for enterprises in the country’s history.”
Dominguez said this measure will “improve the ability of the Philippines to attract highly desirable investments that will serve the public interest.”
“Overall, CREATE is a generous proposal that addresses most, if not all, of the concerns raised with us before by businesses and industry groups. We understand where businesses are now, and we have proactively made adjustments to help them from the taxation side. Once the country’s economic situation improves, our policy response will change accordingly. These amendments, in other words, are on offer for a limited time only,” he said.
During the same briefing, Albay Representative Joey Salceda and Senator Pia Cayetano vowed to push for the measure’s approval before their current session adjourns early next month.
Salceda said the economy posted a 0.2-percent contraction in the first quarter of the year partly because investors declined to increase investments due to uncertainties on the pandemic’s impact.
He said the economic contraction is expected to be as high as 9 percent in the second quarter so in order to address uncertainties, there is a need to pass the CREATE bill.
Salceda further said there is a need to focus on the business sector to help them recover and if this happens, the economy will benefit in the long run.
He said the proposed measure is expected to save about 120,000 jobs and create about 62,000 new jobs this year alone.
The measure, he said, will also be important to address the impact of the trade war between the US and China.
“There will be refugee firms so the Philippines needs to have asylum incentives. We need to provide attractive options for them to choose to locate here,” he added.
Cayetano vowed to strongly push for the measure’s immediate approval but admitted that there are lots of measures that lawmakers are tackling right now.
“If it’s not passed in the next five session days, then the commitment is to really pass as soon as we resume because I believe that more than a majority of the Senators are supportive. It’s just a question of what bills will be prioritized,” she said. (PNA)