Various business groups have unanimously welcomed the signing of Corporate Recovery and Tax Incentives for Enterprises (Create) Act into law even as some of its provisions were vetoed.
Groups such as Makati Business Club (MBC), Philippine Chamber of Commerce and Industry (PCCI), American Chamber of Commerce of the Philippine (Amcham), and the Management Association of the Philippines (MAP) provided their comments after President Rodrigo Duterte signed on Friday night the Create law or the Republic Act 11534.
Create Act seeks to immediately cut the country’s corporate income tax (CIT) rate from 30 percent to 20 percent for local businesses with a net taxable income of P5 million and below and total assets (excluding land) of up to P100 million.
Other businesses will see their CIT lowered to 25 percent. The law also modernizes fiscal incentives by making them performance-based, targeted, time-bound and transparent.
“We had our disagreements with it but there was a lot of give and take over three years.
We are glad the uncertainty is over and local taxes are more competitive, and are now focused on getting more job creating investments,” MBC Executive Director Coco Alcuaz told The Manila Times.
For his part, PCCI President Benedicto Yujuico told reporters his organization considers the law as a landmark economic stimulus program that will significantly accelerate the country’s economic recovery and make the Philippines a more competitive and attractive investment destination.
He added the reduction of income tax rates from 30 percent to 20 for small businesses as well as the exemption of duties and value-added tax of coronavirus disease 2019 (Covid-19) vaccines will also be a great help.
“There are so many other positive factors too numerous to mention here. The vetoed provisions do not adversely affect the benefits,” he underscored.
Meanwhile, Amcham Senior Advisor John Forbes tagged Create Act as “one of the most important reform bills of the Duterte administration.”
“We join the whole business community in welcoming the reductions in the corporate income tax,” he added.
Rizalina Mantaring, the national issues committee chairperson of the MAP, on the other hand, said the law “should help make our country more competitive as it brings our tax rates more in line with our neighbors, and provide welcome relief after a year of economic devastation from the effects of the Covid-19 pandemic.”
Their comments were made even as President Rodrigo Duterte vetoed some of Create’s provisions, which include the increase of the value-added tax-exempt threshold on sales of real property; 90-day period for processing of general tax refunds; definition of investment capital; and redundant incentives for domestic enterprises.
He also vetoed items on allowing existing registered activities to apply for new incentives for the same activity; limitations on the power of the Fiscal Incentives Review Board, particular industries mentioned under activity tiers; as well as provisions granting the President the power to exempt any investment promotion agency from the reform.
Local think tank Action for Economic Reforms (AER), for their part, said the President’s veto strengthened the final outcome of the new law.
Protection of a refinery
“However, it is glaring that one provision — that of protecting the local crude oil refinery, escaped the presidential veto when the very reasons for striking out other weak provisions apply to this specific firm,” the group said.
“That is, the protection given to one local crude oil refinery is distortionary, uncompetitive, unfair, rigid and redundant. What happens is that government is protecting a firm that is objectively uncompetitive,” AER, nevertheless, emphasized.
It can be noted that the think tank has been pushing for exclusion from the law of the exemption on taxes and duties for petroleum refineries.
“This shows that while the administration can have the political will to be uncompromising by striking out many questionable or weak provisions, it succumbed to the powerful lobby of one particular oligarch,” it said.