The House of Representatives ratified Wednesday the bicameral conference committee report on the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act that will reduce the corporate income tax rate to lure more foreign investments and pave the way for faster economic recovery amid the COVID 19 pandemic.
But attracting investors is not the only plus in the passage of the CREATE bill. Authors said government will likely recover P100 to P120 billion in foregone revenues and will strengthen the country’s access to COVID-19 vaccines by granting importation exemption from value added tax and duties.
Speaker Lord Allan Velasco said the ratification of the bicameral report and its eventual approval by President Rodrigo Duterte will put “the Philippines in a better position to attract fresh money and make our economy more appealing as an investment destination.”
“This latest reform to our fiscal regime lowers the corporate income taxes and provides incentives to businesses, therefore providing much-needed relief to our investors—whether big or small—severely impacted by the ongoing global health crisis. One important feature of this reform measure is to exempt from VAT and other duties the importation of COVID-19 vaccines, personal protective equipment or PPE, and treatment and clinical trial drugs, among others,”explained Velasco.
He pointed out that the Philippines, which has the highest corporate income tax rates in Southeast Asia, will become a good investment destination as soon as CREATE is implemented.
Albay Rep. Joey Sarte-Salceda, chairman of the House Committee on Ways and Means, welcomed the strong support shown by both the Lower House and the Senate to the bill.
“This will be the greatest economic reform of the post-EDSA years, second only to economic amendments to the Constitution. Removing the uncertainty will be like opening the floodgates to investment. I expect at least P12 trillion pesos in combined domestic and foreign investment over the next decade due to CREATE alone. USD 90 billion of that will be FDI,” Salceda said.
He added: “This will also result in around 1.8 million jobs over the next ten years. Combined with economic amendments to the constitution to maximize impact, we can produce some 8.4 million jobs.”
However, Makabayan bloc members remained opposed to the CREATE measure for various reasons.
ACT-Teachers Partylist Rep. France Castro warned that while big corporations stand to greatly benefit from the bill, this cannot be said for the medium-small-micro enterprises (MSME), many of which have already closed shop due to the adverse effects of the pandemic.
Asst. Minority Leader and Gabriela Partylist Rep. Arlene Brosas chided the CREATE as a “patently pro-rich sequel to the grossly anti-poor and regressive Tax Reform for Accelereation and Inclusion Law or TRAIN Law which runs counter to the urgent needs of the times.”
Brosas said only the big corporations will become beneficiaries of the provisions of CREATE yet such companies were never affected by the impact of the COVID-19 pandemic.
“A 10-percentage point tax cut on the multi-billion revenues of large enterprises is certainly several times bigger than the 10-percentage point tax cut on the revenues of smaller firms,” she stressed.
Salceda assured oppositors that CREATE will end “investor uncertainty onthe country’s fiscal regime.”
“We are also ending hesitation to invest in the Philippines. Because it took us time to come up with a consensus version, however, we lost USD 18 billion in foregone FDI from 2018 to 2020. The bleeding stops now,” Salceda commented. “We also introduce several tax relief provisions in this bill for all sizes of businesses, especially small and medium ones. With quick vaccine rollout, the chance is stronger that businesses will devote tax savings to creating new jobs. That is why we have also introduced COVID-19 measures in this bill, including VAT and duty-free importation of vaccines,” Salceda added.