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Sunday, May 19, 2024

GMA seeks CREATE, other tax laws review

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Senior Deputy Speaker Gloria Mcapagal Arroyo has sought a congressional review of Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law and other tax laws to eliminate ambiguities in regard to these laws’ implementation in freeport zones and ecozones.

Arroyo, representative of Pampanga’s second district, filed House Resolution 490 urging the House of Representatives’ committee on ways and means to conduct the review. HR 490 called for a congressional inquiry in aid of legislation on the inconsistencies among the CREATE Law; administrative issuances supporting this law; and RA 9400, the law that created the Bases Conversion Development Authority.

Arroyo in the resolution cited Section 293 (F) of the National Internal Revenue Code of 1997 as amended by the CREATE Law, which defined a free-port 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.”

Arroyo’s resolution also pointed out that RA 9400 or the Bases Conversion and Development Act of 1992  “was not repealed but merely amended insofar as there are inconsistent provisions with the CREATE Law.”

Following the Department of Finance’s and Department of Trade and Industry’s issuance of the CREATE Law’s Implementing Rules (IRR), the Bureau of Internal Revenue (BIR) released the Revenue Regulations (RR) for the said law and a follow-up Revenue Memorandum Circular (RMC) which 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, 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 490 pointed out that the 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.”

At the House Ways and Means Committee hearing, Chairman Joey 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 TRAIN laws. During her term, President Gloria Macapagal 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 EVAT, 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 President Arroyo’s two successors continued the country’s economic growth.

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