President Marcos may provide budgetary support to private entities with “highly desirable projects” under Republic Act (RA) No. 12066, the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, the Department of Justice (DOJ) said.

In a legal opinion sought by Finance Secretary Ralph G. Recto, Justice Secretary Jesus Crispin C. Remulla said that while the Constitution is against undue favor to individuals or class privilege “it does not demand absolute equality.”

“It merely requires that in conferring privileges and enforcing liabilities, all persons under like circumstances and conditions be treated alike,” Remulla explained.

He pointed out that the Constitution does not prohibit “legislation that grants only privileges or incentives to persons falling within a specified class, if the law applies alike to all persons within such class, and reasonable grounds exist for making a distinction between those who fall within such class and those who do not.”

The CREATE MORE under RA 12066 is clear and it does not apply automatically to all enterprises within the same industry and to be able to avail of the incentives, certain prerequisites must be met, Remulla also said.

Recto, who is also chairperson of the Fiscal Incentives Review Board (FIRB), asked the DOJ’s legal opinion on the provisions of Section 301 of the National Internal Revenue Code of 1997 (NIRC) that was amended by the CREATE MORE law which gives the President authority “to grant budgetary support in favor of private entities with highly desirable projects.”

Recto sought Remulla’s legal opinion when a private entity registered with the Philippine Economic Zone Authority (PEZA) and sought tax incentives for its project with an investment capital of more than P50 billion.

He told Remulla that the private entry, which was not identified, requested non-fiscal support such as deductions or discounts on power expenses and transmission charges, water diversification, and installation and construction of a substation.

Remulla agreed with Recto that Section 301 of NIRC authorizes the President to grant incentives to highly desirable projects without the need of a recommendation from the FIRB.

But Remulla said “this power of the President is not absolute” and “must be guided by the determination of the FIRB as to what projects are considered highly desirable, the maximum incentive levels, and the performance targets to be imposed on the grantee.”

Remulla also agreed with Recto that “Section 301 of the Tax Code, as amended, provides a statutory basis for the President to craft appropriate fiscal and non-fiscal support packages in favor of highly desirable projects, which, in addition to tax incentives, may be in the form of utilization of government resources or budgetary support provision under the annual General Appropriations Act (GAA).”

“Thus, power discounts may be granted by the President as a non-fiscal incentive in the form of budgetary support, by way of the annual GAA,” he said.

Remulla advised Recto that “the Board be guided by RA No. 10667, the Philippine Competition Act, in order that state aid or support through state resources would not unfairly impact competition and trade by favoring certain companies.”