CALOOCAN CITY, Nov. 28 (PIA) -- The Senate on Thursday approved on third and final reading the landmark Corporate Recovery and Tax Incentives for Enterprises (CREATE) Bill, which seeks to spur growth of the business sector and drive up investments, as well as rationalize and reform the tax incentives being offered by government.
With 20 affirmative votes, one negative vote and no abstention, the Senate passed Senate Bill No.1357, capping months of debates over the landmark tax measure.
According to Senator Pia Cayetano, sponsor of the said bill and chair of the Senate Committee on Ways and Means, the version of the CREATE Bill ultimately approved by the Senate is drastically different from the version proposed by the Department of Finance (DOF) after senators proposed amendments to the bill.
"The Senate version of the CREATE bill provides a balance to achieve two goals - provide an environment to keep businesses thriving despite the pandemic by lowering the corporate income tax rate, and by rationalizing and modernizing the tax incentive system, making it more fair, efficient, and accountable," Cayetano said.
A major change introduced by the bill, Cayetano said, is the lowering of the corporate income tax from 30 percent to 25 percent and eventually to 20 percent by 2027. However, for businesses with an annual income below P5 million, the corporate income tax is immediately reduced to only 20 percent.
Cayetano explained that the move is meant to assist medium, small and micro enterprises recover and help drive the nation's economy forward: "The MSMEs sector usually receive no fiscal incentives, so this reduction of the CIT to 25 percent will be of great help to them. Hopefully, this will enable more Filipinos--especially the youth--to set up MSMEs, whether it's a store, a garage repair shop, or a home-based business."
She also said, following inputs from Senate President Pro Tempore Ralph Recto, exporters and domestic industries are treated differently under CREATE due to the particular differences in their subject markets, as well as their needs and their ability to profit.
Under the bill, exporters may avail of special corporate income tax rate of 5 percent of gross income earned (GIE), which they may continue to avail of for a period of 10 years, or they may avail of enhanced deductions. On the other hand, domestic industries can avail of enhanced deductions for a period of 10 years.
"The total incentive duration for both exporters and domestic industries is 17 years. That is coming from the 4-7 years of income tax holiday, and then the 10 years for the availment of the special corporate income tax rate or the enhanced deduction," she noted.
Another important reform in the bill, Cayetano said, is the expansion of the functions of the present Fiscal Incentives Review Board (FIRB) to better ensure that the existing and future tax perks and other incentives to be granted by government will be "performance-based, time-bound, targeted and transparent."
Cayetano said that the new FIRB, under the bill, will now be chaired by the Department of Finance and co-chaired by the Department of Trade and Industry, with representatives from the Office of the President, the Department of Budget and Management and the National Economic Development Authority.
This body, Cayetano explained, will provide oversight over investment promotion agencies (IPAs), and will be empowered to approve or disapprove incentives for investments beyond P1 billion.
"Let me assure all officials and employees from IPAs that the bill will not be abolishing your agencies or cutting down your jobs. IPAs will continue to perform their function of promoting investments in the Philippines, receive and process applications, and recommend to the FIRB worthy incentives for FIRB approval," she said.
"This is the essence of the CREATE bill, so that we have checks and balances in relation to tax perks offered by government, which are meant ultimately to create jobs, spur investments and help improve the lives of Filipinos," Cayetano said. (PIA NCR)
Source: Philippines Information Agency (pia.gov.ph)
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