Two economic managers have lauded the enactment of the government’s second tax reform program that will unleash one of the country’s largest stimulus measures, but a group also raised that the newly-signed law has succumbed to the “powerful lobby.”
Finance Secretary Carlos G. Dominguez III and Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the signing of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law will primarily benefit micro, small and medium enterprises (MSMEs).
Dominguez said that CREATE is a stimulus package in the form of sizable cuts in corporate income taxes (CIT) and a redesigned fiscal incentives system that will better attract investments and create jobs.
“In the long run, savings from the reduction in CIT rates will provide enterprises with more resources to re-invest in their businesses or expand their operations and thus create more jobs,” Dominguez said in a statement.
“The modernization of the fiscal incentives system with the inclusion of more generous or attractive come-ons will let the government attract the right kind of investors that it wants to do business in the country to provide quality jobs and better opportunities,” he added.
Chua, meanwhile, said the CREATE law, or Republic Act No. 11534, has a “two-fold” impact to help local companies reeling from the adverse effects of the COVID-19 pandemic.
“First, it provides immediate relief to our MSMEs with a five or 10 percentage point reduction in the regular CIT rate,” Chua said in a separate statement.
“Second, it brings our corporate tax rate closer to our ASEAN peers and enhances our fiscal incentives system to help attract more foreign direct investments (FDIs), which will help generate more jobs and accelerate our recovery,” he added.
However, the Action for Economic Reforms (AER) said that while the enactment of CEATE is a welcome development, President Duterte has left a glaring provision that ran counter to the policy’s main objectives.
According to the AER, that provision refers to the protection of a local crude oil refinery, which escaped the presidential veto.
“The protection given to one local crude oil refinery is distortionary, uncompetitive, unfair, rigid, and redundant,” AER said. “It is clear that the government is protecting a firm that is objectively uncompetitive.”
“This shows that while the administration can have the political will to be uncompromising by striking out many questionable or weak provisions, it succumbed to the powerful lobby of one particular oligarch,” the group added.