As deliberations heat up in the Senate on the final shape of the Corporate Recovery and Tax Incentives for Enterprises, also known as CREATE bill, Senate President Pro Tempore Ralph Recto has been drawn into a word war with the advocacy group Action for Economic Reform (AER) over his “grandfather rule amendment,’’ even as the joint foreign chambers on Friday threw their support behind the senator.
It began last week when the AER tagged Recto as the “Donald Trump of the Philippines,” lambasting the lawmaker for “disrupting” the deliberations on the CREATE bill in proposing the so-called grandfather rule provision in the bill that will allow ecozone locators to keep their incentives for several years.
“They [AER] got it wrong,’” the senator said in a text message to the BusinessMirror, stressing that “we are creating, not disrupting [to] make the Philippines great again. Frankly speaking, it is all about disrupting. Our job is to create wealth. Please explain to all idiots.”
And finally, the Joint Foreign Chambers (JFC) also issued a statement supporting Recto’s grandfather rule amendments.
“As we go into the final days of the deliberation of CREATE by the Senate, we express our strong support for the measures and deliberate process that the Senate is undertaking to craft the best possible version of the/bill, taking into consideration the well-studied proposals and recommendations of key senators,” the JFC said.
The JFC recalled that past versions of the CREATE bill under the names TRAIN 2, TRABAHO and CITIRA “would have resulted in the unacceptable loss of jobs and investments to regional competitors of the Philippines.”
“We are thus grateful for the diligent hard work that Senators Pia Cayetano and Ralph Recto and the rest of their colleagues continue to put in to address the many complex issues raised by CREATE,” the JFC said, noting that “in particular, we strongly support the amendments of Senator Recto and the points he raised during his interpellation, which successfully underscored the fierce competition exporters based in the Philippines face in the global export market.”
Moreover, the JFC cited the “difficult conditions faced by exporters, especially during a once-in-a-century pandemic, made it imperative that the Senate, as it has been doing, carefully ensures that a reform measure as significant and consequential as CREATE will boost rather than harm Philippine competitiveness.”
“We believe Senator Recto’s proposal for grandfathering incentives will ensure that existing investors will continue to invest in the country in the long-term and signals to prospective investors that there is stability and consistency in the implementation of policy in the country,” the JFC said, noting that “while it has been a long and exhausting process to get the CREATE bill close to the finish line, we trust that in the following weeks the immense effort that the Senate has expended on the measure will pay off in a law that will not only benefit foreign and Filipino companies but, more importantly, continue to allow global export firms to provide jobs to millions of Filipinos and help to power up the restart of the Philippine economy.”
In hitting the Senate President Pro Tempore, the AER said, “Senator Recto’s actions show us that he is the Donald Trump of the Philippines; someone who imposes his will on the Senate and will do anything to get his way.”
It recalled that in last Monday’s session, the Senate resumed its plenary session finalizing the amendments to the CREATE bill prioritized on the legislative agenda, noting that the amendments currently being ironed out were the major amendments proposed by Recto.
The AER slammed Recto’s proposed amendments, lamenting that this “derailed and paralyzed the process of reform, specifically for the country’s fiscal incentive regime.”
Filomeno Sta. Ana III, AER spokesman, noted that the current incentive regime results in the loss of billions of pesos worth of government revenues yearly due to its vulnerability to abuses. “We have been too generous in granting incentives, many of these which are unnecessary and redundant. Thus, there is a need to restructure our system,” Sta. Ana added.
Sta. Ana said Recto’s proposed amendments, which AER strongly opposed include: the grandfather rule which seeks to retain the tax perks of existing registered companies, the exclusion of certain investment promotion agencies from the incentive package requirements in CREATE, and the creation of a distinction between domestic and export enterprises in granting fiscal incentives.
“By insisting on these proposals, Recto has demonstrated that he is adamant on serving the interests of the businesses, who continuously benefit from the arbitrary dispensation of incentives,” the AER spokesman said.
Sta. Ana added that AER also rebuked Recto’s argument that retaining the current incentive system through his proposed grandfather rule will relieve businesses of the economic burden brought about by the pandemic.
He recalled that during the period of interpellations for CREATE, Recto had argued that restructuring the incentives for all enterprises under CREATE would “make the Philippines less competitive in terms of foreign investment.”
Sta. Ana stressed that “the objective of CREATE is to make incentives targeted, performance-based, time-bound, and transparent, which will keep firms alert and competitive,” noting that the fiscal incentive rationalization under CREATE will “reduce the uncertainty that prevents many businesses from investing and locating in our country.”
At the same time, the AER pleaded for the senators to reject Recto’s proposed amendments. “We appeal to the Senate to pass the CREATE bill at the earliest possible time for us to finally modernize our fiscal incentive regime, improve the governance and institutions in granting tax incentives, and for it to serve as a stimulus during this economic downturn,” Sta. Ana said.