The Department of Finance (DOF) will look into the concerns raised by the Action for Economic Reforms (AER) regarding some provisions under the ratified corporate recovery and tax incentives for enterprises (CREATE) bill.
Two weeks since CREATE was ratified by Congress on Feb. 3, Finance Secretary Carlos G. Dominguez III said the bill that will reduce the corporate income tax rate is not with the Office of the President (OP) yet.
Last week, think tank AER called on President Duterte to line item veto some provisions of the CREATE bill, noting that it contains “questionable provisions,” which run counter to sound economic policy of the national government.
The first two provisions questioned by AER were the exemption on taxes and duties for local petroleum refineries, and the insertion of crude oil refining as part of the Strategic Investment Priority Plan (SIPP).
The third and fourth points raised by AER is the exemption of legislative franchises’ tax and duty incentives from the jurisdiction of the Fiscal Incentive Review Board (FIRB) and the President.
The final point that was raised by AER is the value-added tax (VAT) exemption on housing.
“As far as I know this bill has yet to be enrolled by the Legislature and submitted to the OP. We will study the final enrolled Bill as well as the items you mentioned above,” Dominguez told reporters in a mobile phone message.
Dominguez said the provisions being questioned by the AER did not originate in the DOF.
“Yes, we proposed the measure but as you know the legislature does not necessarily pass any proposal en toto,” the finance chief explained. “We will study the final official enrolled bill.”
AER said exempting local refineries from duties and taxes is discriminatory and gives unnecessary protection to an uncompetitive industry.
“Our initial estimates show that at least P3.5 billion of government revenue will potentially be forgone as a result of giving local refineries these incentives,” AER said.
While AER is not against the inclusion of crude oil refining, per se, in the SIPP, AER however noted that it should be flexible to change depending on priorities and conditions.
“Inserting crude oil refining in the CREATE Bill as a part of the SIPP unduly makes it a permanent priority,” the group said.
On the other hand, the exemption of legislative franchises’ tax and duty incentives from the jurisdiction of the FIRB and the President, AER said will open the floodgates for “gaming by vested interests who want to receive incentives without being subject to rigorous scrutiny.
Meanwhile, AER said VAT exemptions on housing are not a focal point of CREATE and it generally result in foregone revenues.
“For the poor to substantially benefit, these exemptions must be limited to goods and services that are consumed by the poor,” AER said.
Under the ratified CREATE bill, threshold value for VAT exemption on housing was raised to P2.5 million for residential lots and P4.2 million for houses and lots.
“We call on President Rodrigo Duterte to exercise a line item veto of the five contentious provisions cited above, in order to ensure that CREATE’s reforms are not weakened by lobbies from vested interests,” AER said.