Congress fails to pass CREATE
Firms on wait-and-see mode
Investment and expansion plans in the country are currently treading water as they await the delayed approval of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, the Duterte administration’s chief economic manager said.
In a statement, Finance Secretary Carlos G. Dominguez III, said the country’s corporate tax and fiscal incentives system is currently unpredictable after Congress failed to pass the CREATE bill before the end of last year.
According to Dominguez, foreign companies have now adopted a wait-and-see attitude before investing or expanding their businesses in the country due to the pending CREATE law.
To finally “erase” the unpredictability in the country, Dominguez along with other members of the economic team urged the lawmakers to pass CREATE after they resume session later this month.
Along with CREATE, the finance chief also asked Congress to enact other legislative measures of the Duterte Administration that were “designed” to reinvigorate the economy and provide businesses with the stimulus they need to overcome the current economic recession.
Dominguez said CREATE is the largest stimulus package for businesses in the country’s history as it would provide them with hefty corporate income tax (CIT) cuts of 5 percentage points to 10 percentage points under the Senate version.
Once approved, the CIT rate drop from 30 percent—the highest in the region—to 20 percent for micro, small, and medium enterprises (MSMEs) with net taxable income of P5 million and below, and with total assets of not more than P100 million excluding land.
For the rest, including foreign firms, the CIT reduction is 25 percent.
A bicameral conference committee is expected to harmonize the conflicting provisions of the two chambers when the 18th Congress resumes session on January 18 following its traditional yearend recess.
“We hope that the Congress can pass CREATE before the end of January 2021 as this measure is crucial for businesses to continue operating, retain their employees, and create more jobs,” Dominguez said.
“This also provides taxpayers ample time to comply with adjustments to their returns due to the lowering of income taxes effective July 2020 before the tax filing season ends in April 2021,” he added.
Latest DOF estimates showed that CREATE will result in foregone revenues of around P251 billion in the next two years if the law is implemented retroactively to July 2020.