Members of the bicameral conference committee are “trying their best to smooth out” within this month the 27 substantial items between the House of Representatives and Senate versions of the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
House Committee on Ways and Means Chairman Joey Sarte Salceda made a statement after economic managers renewed their call for the early congressional approval in 2021 of the CREATE bill.
“We are committed to start upon resumption and finishing CREATE by January of this year. We know time is of the essence. That is in fact why we approved our version three months after this Congress started, in 2019. I am trying my best to smooth out the concerns of my delegation with the Senate’s version so that we can have a quick bicam. We have been working all week long, and I am confident our changes are well-argued and evidence-based, so the bicam should be quick. If it were all up to me, this would have passed last year,” Salceda, head of the House bicam contingent, said.
The bicameral meeting on CREATE will resume on Tuesday.
Salceda assured economic managers that the House leadership “wants this [CREATE] done fairly and quickly.”
“We approved our version more than year before the Senate did, so we are obviously not trying to delay anything. In fact, the opinion of my delegation’s members is that we try to make our substitute provisions aligned with the consensus on both houses. I can assure you: Not one member of my delegation wants this to spill over to February. January 2021 is our internal deadline,” he added.
“We are trying our best so that this can be resolved in one day of bicam discussions. So, this will probably not take the whole of January’s session,” he said.
The lawmaker vowed that the bicameral version of CREATE will have a stronger bias toward countryside development and gross value added.
“I suppose the differences are because we in the House mostly represent the provinces, while most Senators come from big cities, so the perspective has some differences. But I think the changes I hope to introduce are sensible and should be agreeable to both Houses,” he said.
“I just want longer incentives for countryside investments, a premium on rural and high-value investments, and some measures to make incentives recipients more accountable,” he added.
Erase unpredictability
Earlier, Finance Secretary Carlos Dominguez III, who heads President Duterte’s economic team, called on Congress to pass CREATE when it resumes session this month, to finally erase the unpredictability in the country’s corporate tax and fiscal incentives system that have prompted foreign firms to adopt a wait-and-see attitude before investing or expanding their businesses here.
Dominguez said CREATE is the largest stimulus package for businesses in the country’s history as it would provide them with hefty corporate income tax (CIT) cuts of 5 to 10 percent in the version approved by the Senate in November last year.
This means the CIT rate will go down from the current 30 percent—the highest in the region—to 20 percent for micro, small, and medium enterprises (MSMEs) with net taxable income of P5 million and below, and with total assets of not more than P100 million excluding land. For the rest, including foreign firms, the CIT reduction is 25 percent.
“We hope that Congress can pass CREATE before the end of January 2021 as this measure is crucial for businesses to continue operating, retain their employees, and create more jobs,” Dominguez said.
“This also provides taxpayers ample time to comply with adjustments to their returns due to the lowering of income taxes effective July 2020 before the tax filing season ends in April 2021,” the secretary added.
He said the latest DOF estimates show that CREATE will mean foregone revenues of around P251 billion in the next two years (P133.2 billion in 2021 and P117.6 billion in 2022), if the bill is implemented retroactively to July 2020.
Salceda, however, said he will seek an extension from the BIR on the filing process, saying “I am certain that is doable, since we are also still constrained by pandemic.”
Dominguez explained that these tax breaks are necessary to provide financial relief to businesses, mostly MSMEs that account for 99.5 percent of local businesses and employ about two-thirds of workers in the country’s labor force.
Dominguez said that once CREATE is passed into law in 2021, the Duterte administration will have accomplished about 90 percent of the comprehensive tax reform program (CTRP) that was put in place after the President assumed office in 2016.