Arroyo measure triggers review of CREATE, related tax laws

The House Committee on Ways and Means has begun to review the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) and other related tax laws.

Senior Deputy Speaker Gloria Macapagal-Arroyo (left, standing)

This, after the panel chaired by Albay 2nd district Rep. Joey Salceda took up House Resolution (HR) No.490, which was authored and filed by Senior Deputy Speaker and former president Gloria Macapagal-Arroyo.

HR No.490 called for a congressional inquiry in aid of legislation on the inconsistencies among the CREATE Law, or Republic Act (RA) No.11534; administrative issuances supporting this law; and the Bases Conversion and Development Act (BCDA) of 1992 or RA No.9400.

In particular, Arroyo, through the measure, called for a revisit of CREATE and other tax laws with regard to these laws’ implementation in freeport zones and ecozones.

In a ways and means panel hearing last month, Salceda stated that the committee will file a resolution expressing the intent of the CREATE law. He also said he will remedy the inconsistencies through a measure that will further clarify ambiguities in both the CREATE and the Tax Reform for Acceleration and Inclusion (TRAIN) law.

The Arroyo measure cited Section 293 (F) of the National Internal Revenue Code of 1997 as amended by the CREATE law, which defined a freeport zone as an area “which shall be operated and managed as a separate customs territory..... where imported goods may be unloaded.... without being subject to imported duties.”

The resolution also pointed out that RA No. 9400 or the BCDA law “was not repealed but merely amended insofar as there are inconsistent provisions with the CREATE law".

Following the Department of Finance (DOF) and Department of Trade and Industry's (DTI) issuance of the CREATE law’s Implementing Rules and Regulations (IRR), the Bureau of Internal Revenue (BIR) released its Revenue Regulations (RR) for the said law and a follow-up Revenue Memorandum Circular (RMC).

This limited the applicability of incentives “to importation and VAT zero-rating on local purchases by a registered export enterprise”, and, citing the IRRs of both CREATE and the earlier-passed TRAIN law, the BIR issued a clarification that “The ‘cross-border doctrine’ as applied to Ecozones or Freeport zones have been rendered ineffectual and inoperative for VAT purposes."

HR No.490 also pointed out that CREATE’s IRR and BIR’s RR and RMC restrictions on the applicability of the VAT exemption on importation and VAT zero-rating on local purchases are inconsistent with the intent of the CREATE law and that the RR and RMC ignored the transitory provision of the CREATE law “ to allow Registered Business Enterprises to continue availing of tax incentives, including VAT exemption and Vat zero-rating” within 10 years after effectivity. Tax exemption is the basic consideration of businesses locating in the ecozone or freeport zone .

The resolution further stated that the implementation of the CREATE IRR, the RR and the RMC “runs counter to the concept of a separate customs territory".

During her term in Malacañang Arroyo pushed for a number of painful but vital tax reforms, foremost of which is the Expanded Value Added Tax (E-VAT).

These tax measures, particularly the E-VAT, have been credited for sustaining the economy’s upward growth trajectory even during the global recession of 2008-2009, thus giving the Philippines an unprecedented 38 straight quarters of positive growth.

Economists have also recognized the stabilized economy as the foundation upon which Arroyo’s two successors continued the country’s economic growth. Arroyo is now Pampanga's 2nd district representative.