FINANCE Secretary Carlos G. Dominguez III is calling for an early meeting of the new Fiscal Incentives Review Board (FIRB) once the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law takes effect this month.
President Duterte signed Republic Act 11534 or the CREATE law on March 26. It was published on March 27, making it effective on April 11, or 15 days after publication in the Official Gazette or a newspaper of general circulation. Since April 11 falls on a Sunday, the CREATE law will actually take effect on April 12, according to Department of Finance (DOF).
The law’s implementing rules and regulations is still being finalized by the DOF and the National Tax Research Center.
Dominguez chairs the reconstituted FIRB under the law together with Trade Secretary Ramon Lopez as cochairman.
The finance chief wants the FIRB to meet as soon as possible to discuss the body’s expanded functions under CREATE.
“I want to call a meeting right away,” Dominguez told Assistant Secretary Juvy Danofrata during a recent DOF executive committee (Execom) meeting.
Danofrata, who heads the Strategic, Economics and Results Group (SERG) of the DOF, said the FIRB meeting can be held as early as the week of April 12 given the effectivity of the law.
Under the CREATE law, FIRB’s functions are expanded to cover not only tax incentives given to government-owned or -controlled corporations (GOCCs), but also those granted by investment promotion agencies (IPAs) and other state-run agencies to their respective registered business enterprises.
It is also tasked to review and approve fiscal incentives for projects with a total investment capital of more than P1 billion. As for the grant of tax incentives to registered or activities with investment capital of P1 billion and below, FIRB is delegating this to the IPAs.
Nonetheless, FIRB is given the discretion to increase this threshold amount under the CREATE law.
It is also assigned to determine the target performance metrics as conditions for enterprises to avail of tax incentives; and conduct regular monitoring and evaluation of investment and non-investment tax incentives, such as cost-benefit analysis to determine their impact on the economy and whether agreed performance targets are met. It is also responsible for reviewing the compliance of other government agencies administering tax incentives, with respect to the administration and grant of such tax perks, and impose sanctions, such as but not limited to, the withdrawal, suspension, or cancellation of their power to grant tax incentives.
The new FIRB will have as members the Executive Secretary, the Secretary of the Department of Budget and Management (DBM), and the Director General of the National Economic and Development Authority (Neda).
Its technical committee will be chaired by a DOF undersecretary, with the following members: the Undersecretaries or Assistant Secretaries from the Office of the ES, DTI, Board of Investments (BOI), and DBM; a Deputy Director General from Neda; the Commissioner or Deputy Commissioner of the Bureaus of Internal Revenue (BIR) and of Customs (BOC); Commissioner of the Philippine Competition Commission (PCC); and the chairmen or administrators of IPAs whose scope will be limited to matters concerning their respective IPAs.
The FIRB Secretariat will be staffed by the NTRC and headed by a DOF Assistant Secretary.
Under CREATE, the corporate income tax (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 corporations, meanwhile, will have their CIT rate reduced to 25 percent from 30 percent.
The law also redesigned the country’s fiscal incentives system by making the grant of incentives performance-based, time-bound, targeted and transparent. The CIT cut and the rationalization of the tax incentives system are aimed at helping the country attract high-value foreign direct investments by making the cost of doing business in the Philippines more competitive, especially at this time when the government is putting in place the country’s economic recovery program.
Dominguez said the new menu of corporate tax incentives under CREATE will enable the government to attract the right kind of investors in the country, particularly those offering quality jobs and technology transfer, and introducing new industries that would allow the economy to flourish.
Image credits: AP