(File photo)
MANILA – The House of Representatives on Wednesday ratified the bicameral conference committee report on the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
The chamber approved the final version of the CREATE bill, which seeks to lower corporate income tax from 30 percent to 25 percent for large corporations and 20 percent for small and medium corporations.
House Ways and Means chair Joey Salceda said the bill will be the “greatest economic reform of the post-Edsa years,” second only to economic amendments to the Constitution.
“Removing the uncertainty will be like opening the floodgates to investment. I expect at least PHP12 trillion pesos in combined domestic and foreign investment over the next decade due to CREATE alone. USD 90 billion of that will be FDI (foreign direct investments),” Salceda said. “This will also result in around 1.8 million jobs over the next 10 years. Combined with economic amendments to the Constitution to maximize impact, we can produce some 8.4 million jobs.”
Salceda said fixing the incentives regime to make it more performance-based is also crucial.
“The current investment priorities plan covers some 70 percent of GDP (gross domestic product). While I am willing to give incentives, they must be linked with economic outcomes. Better jobs for our people. Higher wages. More training. More research and development. Stronger business. More competitiveness,” Salceda said.
The bill proposes up to 17 years of incentives for exporters and “critical” domestic enterprises, with four to seven years of income tax holiday (ITH) and 10 years of special corporate income tax (SCIT). The critical industries will be defined by the National Economic and Development Authority (NEDA).
It also proposes up to 12 years of incentives, with four to seven years of ITH and five years of SCIT for enterprises with investment capital not less than PHP500 million, and five years of enhanced deductions otherwise.
Salceda said that while CREATE will result in some PHP931 billion in tax savings for businesses, this would help frontload relief and cover the economic gap brought about by the coronavirus pandemic.
He noted that the final bicameral version was able to shave off PHP282 billion from the original revenue loss under the Senate version.
“We are frontloading relief now because relief is needed now,” Salceda said.
Salceda said competitiveness is a key issue that CREATE hopes to resolve.
“With CREATE, we are also lowering corporate income tax to bring it closer to the Asean region’s average. Asean has been the fastest growing economic region in the world. Our neighbors are our friends, but they are also our competitors. We must strive to keep up with them,” Salceda said.
He said the bill offers several tax relief provisions for all sizes of businesses, especially small and medium ones.
“With quick vaccine rollout, the chance is stronger that businesses will devote tax savings to creating new jobs. That is why we have also introduced Covid-19 measures in this bill, including VAT and duty-free importation of vaccines,” Salceda said. (PNA)
