Senator Pia Cayetano said she is confident that the passage into law of the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill will help spur the growth of the country’s business sector and drive up investments in the years to come.
Cayetano, chair of the Senate Ways and Means Committee and sponsor of the bill, said the measure aims to provide a balance to achieve economic growth and at the same time rationalize the tax incentives being offered by the government to businesses.
“The Senate version of the CREATE bill provides a balance to achieve two goals—provide an environment to keep businesses thriving despite the pandemic by lowering the corporate income tax rate, and by rationalizing and modernizing the tax incentive system, making it more fair, efficient and accountable,” Cayetano said.
The Senate approved the CREATE bill (Senate Bill No. 1357) on third and final reading on Thursday, Nov. 26 with 20 senators casting affirmative votes. Only Sen. Richard Gordon voted against the measure.
The bill seeks to lower the corporate income tax (CIT) from 30 percent to 25 percent and eventually to 20 percent by 2027.
However, for businesses with an annual income below P5-million, she said the CIT is immediately reduced to only 20 percent. This is to assist medium, small and micro-enterprises (SMEs) recover and help drive the nation’s economy forward especially during this time of a COVID-19 pandemic.
“The MSMEs sector usually receives no fiscal incentives, so this reduction of the CIT to 25 percent will be of great help to them. Hopefully, this will enable more Filipinos especially the youth to set up MSMEs, whether it’s a store, a garage repair shop, or a home-based business,” she said.
The bill also ensures that exporters and domestic industries are treated differently under CREATE due to the particular differences in their subject markets, as well as their needs and their ability to profit.
Under the measure, exporters may avail of special CIT rate of 5 percent of gross income earned (GIE), that they may continue to avail of for a period of 10 years, or they may avail of enhanced deductions.
Domestic industries, meanwhile, can avail themselves of enhanced deductions for a period of 10 years.
“The total incentive duration for both exporters and domestic industries is 17 years. That is coming from the four to seven years of income tax holiday, and then the 10 years for the availment of the special CIT rate or the enhanced deduction,” she said.
Cayetano also said another salient point in the bill is the expansion of the functions of the present Fiscal Incentives Review Board (FIRB) to better ensure that the existing and future tax perks and other incentives that would be granted by the government are “performance-based, time-bound, targeted and transparent.”
The FIRB will provide oversight over investment promotion agencies (IPAs), and will be empowered to approve or disapprove incentives for investments beyond P1-billion.
The senator also assured all officials and employees from IPAs that the bill will not be abolishing agencies or cutting down jobs.
“IPAs will continue to perform their function of promoting investments in the Philippines, receive and process applications and recommend to the FIRB worthy incentives for FIRB approval,” she said.
“This is the essence of the CREATE bill so that we have checks and balances in relation to tax perks offered by government, which are meant to ultimately to create jobs, spur investments and help improve the lives of Filipinos,” the lawmaker reiterated.