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Congress urged to pass tax perks bill

/ 04:40 AM January 16, 2021

Fifty-one trade and industry groups urged lawmakers to pass a crucial tax reform bill that is being held up in a bicameral committee, keeping struggling businesses a step away from a policy that would cut taxes and make it easier to tide their workers through these difficult times.

In a joint statement, local and foreign business groups urged Congress to immediately pass the CREATE bill, or the Corporate Recovery and Tax Incentives for Enterprises. Each day that it is not passed, they said, “comes at the risk of losing more jobs.”

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The CREATE bill is the latest iteration of a tax reform package that sought to cut corporate taxes and rationalize tax breaks. Since the package was first introduced about three years ago, the draft has gone through several revisions.

CREATE is the version of the tax package passed by the Senate in November last year. It is considered the most balanced of all versions of the tax package to the extent that the Senate bill even won over some of its critics.

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For example, the IT and Business Process Association of the Philippines (IBPAP), which used to have strong reservations over the tax package because of how call centers would be impacted once tax incentives are rationalized, is now one of the signatories in the joint statement.

“We, members of some of the largest and most widely represented private sector groups in the country, reiterate our strongest and unequivocal support for the immediate enactment of the CREATE bill,” the statement said.

“We join the multisectoral call for the passage of this important legislative measure with urgency. After three years of deliberation, every day of delay comes at the risk of losing more jobs and hemorrhaging more investments,” the business groups said.

Under the Senate’s CREATE bill, the country’s corporate income tax (CIT) of 30 percent— one of the highest in Southeast Asia—to 25 percent and eventually to 20 percent by 2027.

For micro, small and medium-sized enterprises with an annual income below P5 million, that tax rate will be immediately reduced to only 20 percent. The CREATE bill will also rationalize tax breaks, but give existing investors like IBPAP’s member-companies 10 years to transition to the new rules.

“These would instantly bring the country’s CIT rate closer to the Asean average of 21.65 percent and give us more resources to retain our employees and to keep up with financial difficulties. As an investment-attracting move, the CIT cut also alters the financial prospectus of the Philippines for the better,” they said.

Timing is just as important as passing the right bill. The Department of Finance is pushing Congress to pass the bill before the end of the month so that taxpayers can do the necessary adjustments in their tax returns before the tax filing season ends in April. CREATE’s lower tax rates would apply retroactively to July 2020.

The House of Representatives passed its version of the bill in 2019, calling it Citira, or the Corporate Income Tax and Incentive Rationalization Act. The Lower House previously said it would adopt the Senate version of CREATE to speed up the process. But shortly after the Senate passed the bill in November last year, the Lower House called for a bicameral committee to iron out the differences of the two.

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TAGS: Corporate Recovery and Tax Incentives for Enterprises, CREATE bill
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