The National Economic and Development Authority (NEDA) lauded the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill in Senate that aims to help the country recover from the global crisis.
In a statement, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said that CREATE will help small and medium enterprises become more competitive and productive to support the recovery of the local economy.
On Thursday, Senators passed Senate Bill 1357 or the CREATE Act on second and third reading.
“We thank the Senate, through the leadership of Senate President Vicente Sotto III, Majority Floor Leader Juan Miguel Zubiri, and Ways and Means Chairperson Pia Cayetano, for shepherding passage of this landmark reform,” Chua said.
The CREATE Act, once signed into law, will contribute to the government’s economic recovery program, which includes Bayanihan I and II and the Financial Institutions Strategic Transfer (FIST) Act.
CREATE seeks to help businesses recover from the impact of COVID-19. It will benefit micro, small, and medium enterprises (MSMEs) that comprise 99 percent of enterprises and employ over 60 percent of
Filipino workers.
The Senate version of CREATE provides an outright 10 percentage point cut in corporate income tax from 30 percent to 20 percent for domestic businesses with net taxable income equivalent to P5 million and below and with total assets (excluding land) not exceeding P100 million.
Other corporations will benefit from a lower CIT rate of 25 percent, down from 30 percent.
The measure also modernizes fiscal incentives by making them performance-based, targeted, time-bound, and transparent.
“With CREATE, the country will also be able to attract more foreign direct investment with an improved incentives menu, which will maximize desirable economic outcomes such as job creation, domestic value-added, and technology transfer,” Chua said.
Estimates by the Development Budget Coordination Committee showed that once the CIT becomes effective in the second half this year, it 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.