Given the chance to create something that will make things better, many rise to the challenge. We are, by nature, problem solvers. We perpetually seek ways to improve our circumstances and our life. In the past year, the opportunities to find solutions flooded us without end .
One creation that is sure to have a significant impact on the lives of many Filipinos is aptly called CREATE – the Corporate Recovery and Tax Incentives for Enterprises Act. It promises to be the largest fiscal stimulus program for businesses in the country, ever.
The timing, of course, could not have come sooner. Last year, the economy posted a negative growth of some 9%. Jobs were lost at unprecedented rates. Bottom lines were decimated. Investments ground to a halt. Even while the government was rightfully focused on saving lives from the Corona virus, the halt in economic activity was destroying livelihood at an alarming pace.
As the government is able to reasonably hold back a new wave of Covid infections, it is stepping up its efforts at reviving the beleaguered economy. Foremost on their agenda is to secure the appropriate supply of vaccines. According to Secretary Dominguez of the Department of Finance, plans – and budgets – are in place to secure vaccines for 50 million Filipinos. He cited that this would be the optimal number in order to develop herd immunity in the country, in line with World Health Organization (WHO) guidance.
With the vaccines secured, the efforts to escalate economic activity can be pursued more vigorously, albeit with adequate health safeguards in place. But, the most difficult part is proving to be the ability or willingness of people to break out of their quarantine mindset. After all, the Philippines has had one of the longest running quarantines in the world. To this day, “quarantine” is liberally used to contextualize many acts of government. Even in our mildest state of health protocols, we still refer to it as MGCQ or Modified General Community Quarantine.
It is absolutely true that people need to remain vigilant. The rise in cases of new virus strains calls for an added level of alertness and care. The fact is, however, that we know much more today than we did one year ago about how to avoid being infected and what we need in order to contain the spread of the virus. We have learned how to live with the virus even as we await the mass deployment of the vaccine. Basic protocols like masks, shields, disinfection and physical distancing can provide reasonably high levels of prevention. Testing and tracing capacity as well as critical health care facilities have been significantly enhanced in order to cope with potential spikes in transmission. The government – national and local – has secured our borders.
With what we know now, we can take measured steps to return to basic real world activity. We have to surrender our fear and trade it in for vigilance. It’s a big step for some but a necessary one for us to create traction in the revival of economic activity. For us to reopen the economy, we need to first reopen our minds. The Philippine economy is driven mainly by domestic consumption. As such, we need consumer confidence to rise significantly and consistently.
So while Sinovac, Pfizer or Astra Zeneca will be the anti-Corona virus vaccines, the CREATE Act could potentially be the much needed economic vaccine. It will take both to really make an impact in getting the country back on a strong and sustainable growth trajectory.
The beauty of the CREATE Act is that it addresses one of the most fundamental issues that gets in the way of the country’s competitiveness: the 30% corporate income tax. It will bring the country to within the same levels as other ASEAN countries like Singapore and Thailand.
The Act is meant to attract business ventures that will create jobs and enable the pursuit of innovation. It is also designed to be much more inclusive by incentivizing investments in areas outside Metro Manila as well as those impacted by natural disasters and armed conflicts. It offers, among others, four to seven years of income tax holidays and 10 years of special income tax or specialized deductions for exporters and critical domestic market enterprises to be determined by the National Economic Development Authority (NEDA). Other domestic enterprises may also qualify for special income taxes or deductions of up to five years.
In these extremely challenging times, the ability of government to take high-impact action with timeliness and readiness is paramount. CREATE provides the President of Philippines with the increased capacity to approve tax and non-tax incentives to promote investments into – and within – the country. This may fast-track decisions that will help revive economic activity, sooner rather than later.
On top of all the incentives, what the CREATE Act ultimately brings is hope. This, more than anything, is what we need the most today