THE business sector heaved a sigh of relief with the signing of the long-awaited corporate tax reform measure a day before lapsing into law, but continued to weigh the impact of the veto of nine provisions.
Also, the Department of Trade and Industry moved to adopt the Strategic Investment Priorities Plan (SIPP) following the
enactment of CREATE. The SIPP is a list of investment sectors qualified to apply for fiscal incentives under the measure.
Over the weekend, the BusinessMirror talked to several industry leaders following the enactment of the buzzer-beater Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, and most of them welcomed its signing last Friday while others said they’re still reviewing the items vetoed by President Duterte.
Philippine Chamber of Commerce and Industry (PCCI) Chair Alegria Sibal Limjoco cheered on the signing of CREATE “after two years of rallying.”
Limjoco, also the vice chairman of the Philippine Franchise Association and Philippine Retailers Association, commended the recalibration of the measure to make it more responsive and relevant to the present needs of the business sector, especially the firms affected by the pandemic.
“It’s [CREATE] a well-crafted legacy law that will benefit our country economically for generation to come,” Legislative-Executive Development Advisory Council (Ledac) Private Sector Representative George T. Barcelon said.
Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI) President Danilo Lachica said the group appreciates the immediate reduction of corporate income tax (CIT), which is among CREATE’s primary goals.
Under CREATE, the CIT rate is reduced to 20 percent from 30 percent for domestic corporations with net taxable income of P5 million and below and have total assets of P100 million and below effective July 1, 2020. All other local firms and resident foreign companies are imposed a 25-percent income tax.
“People are facing hard times, whatever savings that could be obtained from the reduction of income tax [is beneficial],” Barcelon explained.
Competitiveness enhanced
With such a policy in place, the Financial Executives Institute of the Philippines (Finex) said that the country’s competitiveness will be enhanced, attracting more investments.
“The law will not only give relief to our business from the pandemic but will in the longer term improve the competitiveness of the country as an investment destination,” Finex President Francisco ED. Lim said in a recent statement.
Makati Business Club Executive Director Coco Alcuaz, meanwhile, said the signing of CREATE ended the uncertainty over the corporate tax reform, and focus can now shift to obtaining job-creating investments.
The German-Philippine Chamber of Commerce and Industry Inc. (GPCCI) agreed with this. “The good point for existing and new companies is that there is now visibility after such a long time of uncertainty,” GPCCI President Stefan Schmitz said.
For now, Finex called on the Bureau of Internal Revenue to issue the implementing rules and regulations (IRR) “in time for the tax deadline this April.” Schmitz said that GPCCI hopes the IRR will be finalized quickly so the companies can benefit immediately.
On vetoed items
President Duterte vetoed nine items on CREATE Act, which are still being reviewed by the Confederation of Wearables Exporters of the Philippines (Conwep).
“We are still analyzing the full impact of the veto message, as President vetoed lines only,” Conwep Associate Director Rosette Carrillo said.
Other business groups, Seipi and GPCCI, are also studying the impact of the vetoed items and seeking members’ comments.
Barcelon, meanwhile, offered his sentiments towards two vetoed items: automatic approval of incentives applications within 20 days and value added tax threshold of real property.
“Some clauses such as automatic incentive given a time lapsed was not approved which would have lessened the bureaucratic impact. The other issue on real estate value cap wouldn’t water down the spirit of the law,” he said.
For his part, Senator Panfilo Lacson said it was just as well that President Duterte vetoed some provisions of the bill which, he said, either violated the Constitution or merely advance the commercial interests of “some legislators.”
“The constitutional infirmities were evident under the CREATE law as passed by Congress as they were violative of the ‘one title, one subject rule’ provision under Article VI Section 26(1) of the 1987 Constitution,” Lacson pointed out in an SMS to BusinessMirror’s query on Sunday.
As it turned out, Lacson added, “a number of those non-revenue provisions dealing with fiscal incentives became the object of the line item veto power by the President, which if not lumped with a revenue measure such as CREATE would not have been possible.”
“On second thought,” he added, “it is also a good thing since a number of those ‘rider provisions’ were intended to advance the personal and business interests of some legislators.” He did not name the lawmakers.
Finex, meanwhile, said it disagrees with President Duterte’s veto of some of the items. The BusinessMirror asked the group to elaborate but it has not yet responded to the inquiry.
Investment sectors
Trade Undersecretary Rafaelita M. Aldaba said in an online event last week that DTI is set to adopt the SIPP—a list of investment sectors that may apply for fiscal incentive—after CREATE’S signing into law.
“Of course, in terms of the incentives, these are [a] much higher menu of incentives [and] reduction in corporate income tax rate,” Aldaba said. SIPP breaks down the investments and projects into three industry tiers.
“For example, Tier 1 includes high potential for job creation and emerging industries owing to potential comparative advantage, while Tier 2 includes activities that produce supplies, parts, and components. Meanwhile, Tier 3 includes [research and development] with significant value added, high productivity, breakthroughs in science and health, and high-paying jobs,” Trade Secretary Ramon M. Lopez said in the same event.
Under SIPP, the critical industries include electrical and electronics; chemical and pharmaceuticals; machinery and transport; agriculture and agribusiness; information technology-business process management; research and development; and artificial intelligence, automation, robotics, and digital technologies.
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