THE chairman of the House committee on ways and means has reminded the Senate of their June 5 commitment to pass the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act by August.
Albay Rep. Joey Sarte Salceda, panel chairman, said CREATE is the enhanced version of the Corporate Income Tax and Incentives Reform Act (CITIRA), which is package 2 of the Comprehensive Tax Reform Program (CTRP) of the Duterte administration.
“CITIRA was written for normal times. The moment the House leadership saw that the crisis was going to be deeper than what many initially thought, we decided to call for a bigger set of interventions, including a faster cut in corporate income taxes. CREATE is the result of our conversations with the Executive. These recommendations were validated by multiple engagements with stakeholders, especially representatives of small businesses and large employers,” Salceda said.
“So, of course, I support CREATE. I negotiated for several of the enhancements. As I have repeatedly said, if the Senate passes CREATE as currently proposed next week, we are ready to adopt the version. Para matapos na. The prolonged discussions are extending the agony, but will not enhance the bill. If there were to be improvements, sana noon pa,” Salceda said.
Salceda added that “the House will simply adopt a fiscally viable Senate version. We had our own version since September. We want this reform to happen.”
CREATE will lower the corporate income tax immediately from 30% to 25%, and will enact further decreases of 1% every year from 2023 to 2027, down to 20%.
CREATE will also provide the executive with power to grant flexible “bonus” incentives to entice what Salceda has been calling “elephant-sized investments.”
“The structure of the flexible incentives system is a retrofitting of my 1998 Subsidy Council Bill, which I filed as a freshman congressman. The bigger cut in CIT was something I started floating as early as March, when it became apparent that this crisis will hurt. If the Senate passes it on Monday, I will move the House leadership towards adopting the Senate version, naturally. Akin ‘yan eh,” Salceda said.
“Under CREATE, we can mix and match incentives to the specific needs of these elephant-sized investments. During the House deliberations, the industry representatives always lamented how we missed attracting companies like Samsung. This addresses that issue,” Salceda said.
Salceda, one of Asia’s top market analysts in the 1990s, added that the Philippine markets have been “trading sideways for several months now.”
“This is a sign that piecemeal support is not boosting overall confidence. We need big structural reforms to show consumers, investors, and businesses that we will do whatever it takes and whatever will work,” Salceda said.
“CREATE will be the necessary first step. The market and investment liberalization laws under the amendments to the FIA, RTLA, and the PSA are also in order. Bayanihan 2 was very good news for businesses fighting for their lives. It will keep our economy alive, but it won’t get the economy running. Until we pass big structural reforms, expect constipated market sentiment.”
“By passing CREATE, we will immediately signal to the private sector that we trust in future Philippine growth, and that we are giving them the tools to get us out of the ditch. That will be a quick boost to the animal spirits of the market. An immediate 5% cut in CIT is a big deal,” Salceda said.
Salceda added that by now, “we have probably foregone 15 billion dollars in foreign investments since CITIRA was approved by the Cabinet on January 2018. Every day that we fail to decide on this issue, we hurt the economy – and we forego jobs, revenue, and investments. Tama na po.”
“The uncertainty is a ceiling to Philippine growth. Remove the uncertainty, and I guarantee you, market sentiment will change almost instantly,” Salceda added.