A LEGISLATOR has asked President Rodrigo R. Duterte to seek a special session of Congress in order to pass “critically-needed” measures to boost the economy, such as the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).
In a statement Thursday, Albay Representative and House Ways and Means committee chairman Jose Maria Clemente S. Salceda said that the House intends to pass its stimulus recovery program before it adjourns, and that it has already “done its duty of passing the old version of CREATE, which is CITIRA (Corporate Income Tax and Incentives Rationalization Act), and will in fact adopt the Senate version if they pass it on Monday or Tuesday next week.”
“We have to get both of these measures done now. I would of course prefer to have them approved for the President’s signature next week, but if we cannot, the best alternative is a special session,” he said.
The CREATE bill is the revised form of CITIRA, which accelerates the timetable for reducing the corporate income tax to 25% from the current 30%.
The tax rate will be further reduced by 1 percentage point annually beginning 2023 until 2027. In CITIRA, the bill proposed to gradually reduce the rate until it hits 20% in 2029.
The tax reductions were accelerated due to the coronavirus disease 2019 (COVID-19) crisis. The bill is now positioned as a means of attracting investment from foreign companies looking to move out of China.
Mr. Salceda estimates that about $12 billion in foreign investment has been foregone due to the two-year delay in passing corporate tax reform legislation, which was approved by the Cabinet in January 2018. He added that a delay in the passage of an “adequate” economic recovery plan costs the economy up to P100 billion in new economic activity every week.
“Every single week that we are unable to pass an economic stimulus plan and the corporate tax reform costs us hundreds of billions of pesos in foregone opportunities every week. At that rate, hindi na po kayang palagpasin pa hanggang July (It cannot wait beyond July). June is the time to get them enacted, so that we can still reap the benefits in the second half. Kami po sa House (We in the House) are confident that if we have to, we can get both approved by June 3. If the Senate cannot, the President should extend session and not terminate until they get both passed,” he said.
Finance Secretary Carlos G. Dominguez III said that the tax reform package entrusts in the private sector the funds and resources needed to “fire up the economy and quickly bring back the country to the path of high and inclusive-growth.”
“There is no better time to reform our corporate income tax system, and modernize our fiscal incentives system than now. This could be the most important economic reform in decades. As statements of our partners in industry and civil society show, the economy can no longer bear any delay in this reform. Now is the best time to do it,” Mr. Dominguez said in a statement Thursday.
Mr. Dominguez said that 5% CIT reduction is expected to reduce government revenue by P42 billion in the second half of the year if CREATE is implemented by July, and by another P625 billion over the next five years. The tax cuts are expected to fuel economic activity as businesses, especially micro, small and medium enterprises (MSMEs), retain more funds to support their operations and keep employees at work.
Business groups on Thursday expressed their support for the immediate passage of CITIRA, saying that the measure will be a “life-restoring boost to market confidence, providing the most direct, cost-efficient and instant relief to businesses suffering from business reverses due to COVID-19.”
“The instant 5% tax savings by July is a direct infusion of financial assistance to businesses, giving them more resources to retain employees and to keep up with financial difficulties. As an investment- attracting move, the CIT cut drastically alters, for the better, the financial prospectus of the Philippines,” according to the joint statement of 32 groups.
Aside from the tax cuts, CREATE also extends the sunset period for current incentive recipients from two to seven years; lengthens the effectivity to five years of the net operating loss carryover (NOLCO) for non-large taxpayers from the current three years; and grants discretion to the Fiscal Incentives Review Board (FIRB) to recommend to the President longer incentives and additional non-fiscal incentives for critical investments.
“We humbly request the Senate and the House of Representatives to move quickly and decisively to push CREATE forward and ensure its passage urgently, ideally before Congress adjourns on June 3. Any further delay comes at the risk of losing more jobs and hemorrhaging more investments,” according to the joint statement. — Genshen L. Espedido