CREATE and Rudyard Kipling

Published August 11, 2020, 10:00 PM

by Milwida Guevara

I become a bit poetic when I think of CREATE’s stimulus package. 

“Oh, East is East, and West is West, and never the twain shall meet.”

Just like the poem, CREATE does not meet the needs  of our people in this moment of crisis!

CREATE lowers the corporate tax rate and provides a host of incentives.  It gives the Secretary of Finance and the President the power to design an incentive package which is not even defined.  The nature and extent of the package could still be lurking in the labyrinth of somebody’s imagination.   

CREATE gives businesses a tax advantage by reducing the income tax that should be paid to government.  But we cannot see how the proposed tax relief can help our daily wage earners who do not receive any pay without any work.   The assumption can be heroic.  Perhaps, the tax relief will be passed on to the poor.  But experience does not give support a post hoc ergo propter hoc, i.e. after this, therefore that. 

Studies show that firms in the US used the tax cut to benefit themselves.  The amount of dividends that were distributed to shareholders was increased and corporate executives were given hefty pay increases and perks.

CREATE would have allowed “east to meet west” if there were provisions that “incentivize” firms to retain and help workers.  A model in contrast is the US CARES Act which provides low interest loans to businesses.  Loans of firms that retain their employees can be forgiven based on the amount that they use to cover payroll costs.  The amount of loan forgiveness is reduced when the payroll is substantially reduced. In addition, small firms and nonprofit organizations that retain workers during the COVID crisis are eligible to a refund of the payroll tax up  to 50% of wages .

Since CREATE does not directly help workers, we cannot see how it can address the causes of the 16.5% drop in our GDP.  Private consumption expenditures dropped by 15.5% and unemployment rose to 17.7% leaving some 7.3 million Filipinos jobless.  The safety net which remittances from overseas workers used to provide is no longer there.  Some 102,000 OFWs have been repatriated.  Inflows from

Saudi Arabia, a major employer of Filipino workers, dropped by 23.2% from January to April this year.

The bridge that could have connected East and West should have been the Social Amelioration Program of government.  But its implementation has been peppered with difficulties and inefficiencies.  Relief was slow in coming—and the 2nd tranche which was supposed to be given in May has not reached 100% of the intended beneficiaries in August.  The tales of woes are numerous—families who needed assistance the most were not reached.  Assistance to some families overlapped and political patronage was not avoided.  The underpaid and overworked barangay workers became the scapegoat for the inefficiencies of government.   

The theme of Kipling’s poem resonates—solving a health crisis though military operations, activism to demand what we deserve can be branded as terrorism.

Help does take long in coming!

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