Private sector groups reiterate call for immediate passage into law of CREATE bill

Fifty-one of the country’s largest private sector and business groups on Friday called anew for the immediate passage into law of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill.

“We humbly request the Senate and the House of Representatives to move quickly and decisively to push CREATE forward and ensure its immediate enactment,” the groups said in a statement.

“We join the multisectoral call for the passage of this important legislative measure with urgency. After three years of deliberation, every day of delay comes at the risk of losing more jobs and hemorrhaging more investments,” the groups added.

In November 2020, the Senate approved on third and final reading its version of the CREATE.

The House of Representatives, meanwhile, already approved its version of the corporate income tax reform measure in 2019.

Both chambers must now reconcile the differences of their versions through a bicameral conference committee, after which a report shall be ratified by both houses before it will be transmitted to the President for signature.

CREATE seeks an outright reduction in corporate income tax rate from the current 30%. Domestic businesses with assets amounting to P100 million and below, as well as those with taxable income equivalent to P5 million and below, would be subjected to a 20% tax rate.

Domestic enterprises with assets above P100 million or those with taxable income amounting to more than P5 million would have to comply with a 25% tax rate.

Meanwhile, foreign corporations would have a fixed reduced tax rate at 25%.

The Philippines currently has the highest corporate income tax rate in the ASEAN region at 30% since 2009, while Singapore has the lowest at 17% since 2010, according to the Department of Finance.

“We particularly support the immediate reduction of corporate income tax (CIT) rate from 30% to 20% for small and medium enterprises earning net taxable income not exceeding P5 million, and from 30% to 25% for all other corporations, effective July 1, 2020,” the groups said.

“These would instantly bring the country’s CIT (corporate income tax) rate closer to the ASEAN average of 21.65% and give us more resources to retain our employees and to keep up with financial difficulties. As an investment-attracting move, the CIT cut also alters the financial prospectus of the Philippines for the better,” the groups added.

At the same time, the proposed law also aims to rationalize fiscal incentives by making them time-bound, targeted, and performance-based.

The Fiscal Incentives Review Board (FIRB), chaired by the Secretary of Finance, shall be in charge of granting incentives to registered projects or activities with investment capital of above P1 billion.

The grant of incentives to those with investment capital P1 billion and below, meanwhile, shall be delegated to the Investment Promotion Agencies, provided that the FIRB may increase this threshold periodically or as may be necessary.

The measure also gives the President of the Philippines the power to approve a modified set of incentives to attract highly-desirable investments that would usher in more employment opportunities, specifically those with minimum investment capital of P50 billion.

“We are hopeful the proposal to give flexible authority to the Fiscal Incentives Review Board (FIRB) and the President in granting both fiscal and non-fiscal incentives will make the tax incentives system an agile mechanism that can seize high-value investment opportunities. We thank Congress for including proper safeguards against abuse of discretion or making it a political tool to grant favors to undeserving recipients,” the groups said.

“We also recognize that CREATE provides a transition of 10 years for current holders of incentives. This should ease some concerns about the tax regime change,” it said.

The private sector groups that signed the statement are the following:

1. ACI Philippines

2. Anvil Business Club

3. Ateneo Law Alumni Association , Inc. (ALAAI)

4. Bankers Association of the Philippines (BAP)

5. Cebu Business Club (CBC)

6. Cebu Leads Foundation (CLF)

7. Chamber of Thrift Banks (CTB)

8. Chinese Filipinos Business Club Inc. (CFBC)

9. CIBI Foundation, Inc.

10. Federation of Filipino-Chinese Chambers of Commerce & Industry, Inc. (FFCCCII)

11. Federation of Indian Chambers of Commerce Philippines, Inc. (FICCI)

12. Financial Executives Institute of the Philippines (FINEX)

13. Fintech Philippines Association

14. Fintech Alliance Philippines

15. Foundation for Economic Freedom (FEF)

16. French Chamber of Commerce and Industry in the Philippines (CCI FRANCE-PHILIPPINES)

17. Fund Managers Association of the Philippines (FMAP)

18. Guild of Real Estate Professionals (GREENPRO)

19. Hotel and Restaurant Association of the Philippines (HRAP)

20. Institute for Solidarity in Asia, Inc. (ISA)

21. Institute of Corporate Directors (ICD)

22. Integrated Bar of the Philippines (IBP)

23. Intellectual Property Association of the Philippines (IPAP)

24. Investment House Association of the Philippines (IHAP)

25. IT and Business Process Association of the Philippines (IBPAP)

26. Licensing Executives Society Philippines (LESP)

27. Makati Business Club (MBC)

28. Management Association of the Philippines (MAP)

29. Money Market Association of the Philippines (MART)

30. NATIONAL REAL ESTATE ASSOCIATION, INC. (NREA)

31. Nordic Chamber of Commerce of the Philippines, Inc. (NORDCHAM)

32. Organization of socialized Housing Developers of the Philippines (OSHDP)

33. Philippine Association of Securities Brokers and Dealers, Inc. (PASBDI)

Philippine Bar Association (PBA)

35. Philippine Center for Entrepreneurship (GO NEGOSYO)

36. Philippine Council of Associations and Association Executives (PCAAE)

37. Philippine Franchise Association (PFA)

38. Philippine Hotel Owners Association, Inc. (PHOA)

39. Philippine Institute of Certified Public Accountants (PICPA)

40. Philippine Life Insurance Association (PLIA)

Philippine Retailers Association (PRA)

42. Philippine Women’s Economic Network (PHILWEN)

43. Procurement and Supply Institute of Asia (PASIA)

44. Rural Bankers Association of the Philippines (RBAP)

45. Shareholders’ Association of the Philippines (SHAREPHIL)

46. Spanish Chamber of Commerce in the Philippines (La Camara)

47. Subdivision and Housing Developers Association (SHDA)

48. Tax Management Association of the Philippines (TMAP)

49. Trust Officers Association of the Philippines (TOAP)

50. UP School of Economic Alumni Association (UPSEAA)

51. Wowen’s Business Council Philippines (WBCP)

“CREATE is a historic economic reform, one of the largest in decades. As a stimulus package, CREATE will be a boost to market confidence, providing instant relief to businesses suffering from business reverses due to the COVID-19 pandemic,” the groups said. — RSJ, GMA News