The Department of Finance (DOF) sees the light at the end of the tunnel as the Senate is seen to pass the corporate recovery and tax incentives for enterprises (CREATE) bill before the Congress takes its traditional Christmas break in December.
In a statement, Finance Secretary Carlos G. Dominguez III has said he “sees light at the end of the tunnel” concerning the congressional approval before the yearend of the long-overdue CREATE bill.
Dominguez said they have been “very intensely” engaging with the Senate on the long-pending CREATE bill, which forms part of the government’s stimulus package for the country’s recovery from the pandemic-induced economic turmoil.
Senators are currently discussing the proposed amendments to the CREATE bill with an eye to approving it on third and final reading before the Congress takes its traditional Christmas break.
The House of Representatives had already approved its version of the bill in September last year.
“We have been engaged with the Senate very intensely over the last two or three weeks. We see light at the end of the tunnel, and we expect this to be done by the end of this year,” Dominguez said.
The finance chief described CREATE as the largest stimulus package for businesses reeling from the economic impact of the COVID-19 as this measure aims to reduce the corporate income tax (CIT) outright from 30 percent to 25 percent once it becomes effective.
The corporate income tax rate will be reduced further by one percentage point every year from 2023 to 2027 based on the proposal of the DOF.
According to earlier estimates by the Development Budget Coordination Committee (DBCC), if the CIT becomes effective in
the second half of 2020, this will result in a reduction of government revenues of around P44.6 billion.
However, the tax losses will benefit all firms, especially the country’s micro, small, and medium enterprises (MSMEs), as they can use their tax savings to fund their operations and retain employees.
For 2021 and 2022, the estimated foregone revenues are P97.2 billion and P107.6 billion, respectively, that these firms can invest in the revitalization of their businesses and to create even more jobs for Filipino workers.
CREATE will also enhance the flexibility of the incentives system for businesses to enable the government to proactively attract investments that will bring exceptional benefits to the economy.
Dominguez noted that the CREATE bill awaiting approval by the Congress is the farthest it has come when it was first proposed 25 years ago.
CREATE, which was certified as urgent by President Duterte in March, is among the key recovery measures designed to further energize the economy and accelerate its recovery from the pandemic, Dominguez said.
An outright five percentage point reduction in the CIT rate will benefit all business enterprises in the country that have not enjoyed any type of income tax incentive.
Dominguez expects the CIT reduction to boost the efforts of enterprises, especially micro, small and medium enterprises (MSMEs), to protect jobs and recover from the challenges arising from COVID-19.