A joint congressional panel approved on Monday a bill that will reduce the rate of corporate income tax in a bid to attract more foreign investment and help the coronavirus-hit country recover.
The bill, a key priority of President Rodrigo Duterte's administration, will lower corporate income tax rate to 25 percent for big firms and 20 percent for small enterprises from 30 percent, the highest in Southeast Asia, by 2029.
Albay Rep. Joey Salceda, chairman of the bicameral committee, said the reconciliation of the Senate and House versions of the bill will remove investor uncertainty over the country's fiscal regime.
"(It) will be like opening the floodgates to investment," Salceda said in a statement.
The bill will also streamline incentives to investors to plug leakages worth over P300 billion ($6.24 billion) resulting from tax holidays and other perks given to investors perpetually.
Salceda said the tax reform measure will create 1.8 million jobs over the next ten years, and result in some P931 billion in tax savings for businesses.
The bill, Salceda said, will also allow duty-free importation of COVID-19 vaccines, which are expected to arrive this month.
Senator Pia S. Cayetano sees an end to investor uncertainty in the country with the impending passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill.
The Senate Ways and Means Committee Chair met informally with the members of both Houses led by Salceda, the House Ways and Means Chair, to discuss the disagreeing provisions in the versions of the two chambers.
"I would like to report to the Filipino people and to our business community that the CREATE bill, the landmark legislation that the Senate passed in November last year, is finally moving forward," she said.
"I can now say more confidently that the cloud of uncertainty that has hovered over our country's investment climate due to unwarranted delays in CREATE's passage is about to end," Cayetano said.
"The wait-and-see period would soon be over and investors can look forward to doing business in our country under a tax and fiscal incentives regime that favors job generation, ensures flexibility and accountability, and promotes sustainable and inclusive growth," she added.
Based on the discussions, Cayetano said the Senate version mandating the immediate and substantial lowering of the Corporate Income Tax (CIT) will be retained.
Under the Senate version, the current 30% CIT rate will be reduced to 25% for all enterprises, and to 20% for qualified micro, small, and medium enterprises (MSMEs) with a net taxable income below P5 million and total assets below P100 million.
"The CIT reduction will bring much-needed economic relief to businesses, especially to MSMEs. This will also allow the Philippines to be more competitive in the ASEAN region and position itself more firmly as a viable investment location," she said.
The incentives scheme for registered enterprises under the Senate version would also be retained, save for some changes in the incentives to be granted for both exporters and "critical" domestic market enterprises, and for general domestic market enterprises.
The National Economic and Development Authority (NEDA) shall be tasked with determining which domestic industries should be classified as "critical."
Meanwhile, Senator Risa Hontiveros on Monday urged the government to take a more aggressive role of being both an “employer” and an “income provider” as the private sector-led recovery is taking more time and leaving the most vulnerable at the mercy of a plunging economy.
Through public employment programs (PEPs), Hontiveros said jobs and income support will be provided to Filipinos to help cushion the effect of income loss and escalating prices of goods and services brought about by the pandemic.
She explained that in the context of the current COVID-19 crisis, aggressive PEPs, apart from the conventional public works, can be utilized as a strategy for recovery to augment front line services essential to pandemic response in communities.
“We can mobilize more workers to assist in contact tracing, provide support to persons vulnerable to COVID-19, such as the elderly, persons with disabilities (PWDs) or chronic health problems, those who are sick at home or recovering, and persons in quarantine… as well as strengthening essential services such as waste collection, public sanitation, and other facilities,” she said.
Despite being one of Asia's fastest-growing economies before the pandemic, the Philippines lags regional peers in attracting foreign direct investment because of foreign ownership restrictions, high power costs, and poor infrastructure.
Some lawmakers, including Duterte's allies, have proposed changes in the economic provisions of the Philippine constitution to liberalise investment rules.