An additional one-year income tax holiday (ITH) would be granted to companies that will not retrench workers, according to Trade and Industry Secretary Ramon M. Lopez.
Lopez revealed during a webinar with the European Chambers of Commerce in the Philippines as he also shared that the full-year estimate of 3-4 percent economic contraction could grow bigger depending on what will happened in the next few months or weeks.
He said the GDP contraction could even be worse than a 3-4 percent decline.
According to Lopez, the additional ITH to companies that do not reduce workers has been considered as a provision under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, a replacement of the Corporate Income Tax and Incentives Reform Act (CITIRA) that seeks to amend the country’s tax incentive regime to investors by making it timebound.
“The additional one-year ITH is a way to incentivize companies not to remove workers. Companies that do not reduce workers to be given additional year. That is being considered now,” Lopez told European businessmen adding that the Senate is expected to pass the bill soon.
The Philippine unemployment rate rose a record high in April at 17.7 percent or 7.3 million unemployed while underemployment was at 18.9 percent, highest in 4 years.
“When this law is passed, and this law has been adjusted also when it comes to putting time bound on incentives or existing companies enjoying it by lengthening the transition period from two years to five years now, the maximum is about nine years,” he said.
The CREATE also seeks to implement policies on rural development by providing more incentives to investors that will locate outside of the metropolitan areas.
The CREATE Bill is a major pillar in Phase 3, which is Rebuild Philippines, of the government’s response to the COVID-19. CREATE will immediately reduce the corporate income tax to 25 percent from the current 30 percent to entice companies to locate here or prevent them from leaving as the economy plunged in the first quarter this year to 0.2 percent from a range of 6-7 percent.
Other major reform bills that DTI is pushing for passage at the legislative branch include the Retail Trade Act, Public Services Act, and the Foreign Investments Negative List.
During the Rebuild Phase, the government seeks to accelerate investments in sectors that provide basic necessities – food, health and education; support 4th Industrial Revolution – smart manufacturing and digital technology; address supply chain gaps; develop a more modern Philippines; and generate high value/job creation. The strategy also includes the promotion of investments to develop PPE (protective personal equipment) ecosystem, including establishment of testing laboratories.