The House of Representatives on Wednesday ratified the bicameral conference committee report on the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
The chamber approved the final version of the CREATE bill, which seeks to lower corporate income tax from 30 percent to 25 percent for large corporations and 20 percent for small and medium corporations.
Speaker Lord Allan Velasco on Wednesday said the ratification of the measure puts the Philippines in a better position to attract fresh money and make our economy more appealing as an investment destination.
“This latest reform to our fiscal regime lowers the corporate income taxes and provides incentives to businesses, therefore providing much-needed relief to our investors—whether big or small—severely impacted by the ongoing global health crisis. One important feature of this reform measure is to exempt from VAT and other duties the importation of COVID-19 vaccines, personal protective equipment or PPE, and treatment and clinical trial drugs, among others,” Velasco said in a statement.
The Philippines has the highest corporate income tax rates in Southeast Asia, and with CREATE, “we can expect our country to be as competitive as our neighbors,” the Speaker said.
“With the approval of CREATE together with our efforts to amend the restrictive economic provisions of the 1987 Constitution, we are confident that we can hasten our economic recovery, attract more local and foreign investors and create jobs for the Filipino people,” Velasco said.
“We thank our colleagues in both chambers of Congress for ratifying this measure and for heeding the call of the times,” he added.
House Ways and Means chair Joey Salceda said the bill would be the “greatest economic reform of the post-Edsa years,” second only to economic amendments to the Constitution.
“Removing the uncertainty will be like opening the floodgates to investment. I expect at least PHP12 trillion pesos in combined domestic and foreign investment over the next decade due to CREATE alone. USD 90 billion of that will be FDI (foreign direct investments),” Salceda said.
“This will also result in around 1.8 million jobs over the next 10 years. Combined with economic amendments to the Constitution to maximize impact, we can produce some 8.4 million jobs,” he added.
Salceda said fixing the incentives regime to make it more performance-based was also crucial.
“The current investment priorities plan covers some 70 percent of GDP (gross domestic product). While I am willing to give incentives, they must be linked with economic outcomes. Better jobs for our people. Higher wages. More training. More research and development. Stronger business. More competitiveness,” Salceda said.
The bill proposes up to 17 years of incentives for exporters and “critical” domestic enterprises, with four to seven years of income tax holiday and 10 years of special corporate income tax. The critical industries will be defined by the National Economic and Development Authority.
It also proposes up to 12 years of incentives, with four to seven years of ITH and five years of SCIT for enterprises with investment capital not less than PHP500 million, and five years of enhanced deductions otherwise.
Salceda said that while CREATE would result in some P931 billion in tax savings for businesses, this would help frontload relief and cover the economic gap brought about by the coronavirus pandemic.
He noted that the final bicameral version was able to shave off P282 billion from the original revenue loss under the Senate version.
“We are frontloading relief now because relief is needed now,” Salceda said, adding competitiveness was a key issue that CREATE hoped to resolve.
“With CREATE, we are also lowering corporate income tax to bring it closer to the Asean region’s average. Asean has been the fastest growing economic region in the world. Our neighbors are our friends, but they are also our competitors. We must strive to keep up with them,” Salceda said.
He said the bill offered several tax-relief provisions for all sizes of businesses, especially small and medium ones.
“With quick vaccine rollout, the chance is stronger that businesses will devote tax savings to creating new jobs. That is why we have also introduced COVID-19 measures in this bill, including VAT and duty-free importation of vaccines,” Salceda said.