Business Bayani PH

On January 18, the House of Representatives committee gave its approval to the CREATE MORE (CREATE to Maximize Opportunities for Reinvigorating the Economy) bill in a key development for economic recovery. 

The bill aims to cut income taxes for both local and foreign companies to a competitive 20%. This move, up for discussion at the House Ways and Means panel next week, seeks to modify the existing Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Albay Representative Jose Ma. Clemente S. Salceda, who leads the Ways and Means Committee, highlighted the bill’s goal to improve fiscal and non fiscal provisions of the Tax Code and reconcile differences between the CREATE Act and its implementing rules.

Under the current CREATE law, companies face a 25% income tax rate, with a limited 20% rate applying only to specific local enterprises. CREATE MORE, however, introduces a simpler approach, offering duty and VAT exemptions to domestic and export companies, including those in ecozones and freeports. It also proposes a 20% corporate income tax rate for both local and foreign corporations under an enhanced deduction income tax regime.

The proposed law extends benefits to registered business enterprises (RBEs), providing a 200% additional deduction for power costs during the Income Tax Holiday (ITH) period and 100% additional deductions for trade-related expenses. 

CREATE MORE also covers the tourism industry under the reinvestment allowance and allows the IT and business process outsourcing sector to conduct business under alternative work arrangements.

If enacted, the bill would shift the power to grant and approve tax incentives back to investment promotion agencies (IPAs) from the Fiscal Incentives and Review Board (FIRB).

Concerns have been raised about the potential impact on government revenues. In a statement given to Businessworld, Eleanor L. Roque, tax principal of P&A Grant Thornton, emphasized the need to align the bill’s tax provisions with the Philippines’ commitment to the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

On the other hand, Jose Enrique A. Africa, executive director of the IBON Foundation, expressed reservations to the same publication, stating that lowering taxes under CREATE MORE might erode the government’s fiscal space. 

He highlighted the importance of balancing corporate competitiveness with the imperative of contributing more to government revenues for sustainable development.

Despite concerns, the endorsement of the CREATE MORE bill by the House committee signals a potential shift in economic policies, aiming to foster growth and competitiveness in the corporate landscape. 

As discussions progress, the bill’s impact on various sectors and its alignment with international tax standards will be closely monitored.◼