THE Trade department said the passage of a key tax reform bill, known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE), forms a major part of its investment promotion message.
Trade Undersecretary Ceferino S. Rodolfo in an online briefing last month said that he is hoping for uncertainties over CREATE to be resolved in January, in time for companies to reap the retroactive benefits of the bill by the income tax deadline in April.
“Sana lang mabilis. Kasi actually pino-promote na natin ‘yung CREATE eh. (I hope for a speedy passage because we are promoting CREATE to investors) Sinasabi na lang natin sa mga investors (We are telling investors) that we believe that the CREATE bill as passed by the Senate will be the baseline in terms of incentives,” he said.
Legislators will go into a bicameral conference committee to reconcile clashing provisions in the two chambers’ bills. The Senate passed its bill in November, while the House approved its version in 2019.
The Senate bill reduces corporate income tax to 25% from 30% starting July 2020, and then by one percentage point each year between 2023 and 2027. The rate falls to 20% for domestic companies with net taxable income of P5 million or lower and total assets less than P100 million.
CREATE also streamlines the tax incentives system to make it more time-bound and performance-based.
“By February siguro ‘yan, March, nagpre-prepare na ng mga income tax applications ‘yung mga kumpanya (Companies will be preparing their tax returns by February or March)… ‘yun ‘yung window (that’s the window) not just for those with incentives but in general for all establishments,” Mr. Rodolfo said.
Mr. Rodolfo hopes that the provisions on incentives in CREATE, which he said balance the ability to attract investment and generate fiscal revenues, will be carried forward in the bicameral process.
“We trust the legislative wisdom of both houses to merge, consolidate, work on the whatever provisions of CREATE and CITIRA they deemed divergent,” he said, referring to a previous incarnation of the tax reform bill, the proposed Corporate Income Tax and Incentives Rationalization Act. CITIRA was repositioned as an economic recovery measure, CREATE, following the damage done to the economy by the pandemic.
The Finance department has said that CREATE will cost the government P250 billion in foregone revenue over the next two years after the corporate income tax cut was accelerated for small businesses. — Jenina P. Ibañez