The Department of Trade and Industry (DTI) estimated that P200 billion new investments would come in because of the government’s recently passed corporate tax reform package, which it said could create up to two million new jobs.
Trade and Industry Secretary Ramon Lopez said in a statement on Monday that they expected a “massive inflow of investments” after President Duterte signs the CREATE Act, or the Corporate Recovery and Tax Incentives for Enterprises.
CREATE will cut corporate taxes across the board and rationalize tax breaks. From Southeast Asia’s highest corporate tax at 30 percent, the rate will drop to 25 percent for large corporations and to 20 percent for smaller businesses.
The measure was finally passed in Congress after more than three years of uncertainty as the tax package went through different versions amid fears that it would actually lead to massive job losses. The CREATE measure, which was considered by the DTI as the most balanced version of the package, ended up winning over even some of its early critics.
Lopez said it would also modernize the country’s incentive system, offering income tax holidays, special corporate income tax rates or enhanced deductions to critical industries.
The DTI estimate echoes the one made by the Department of Finance in 2018, when it said that the tax package— then called “Trabaho” bill— would create 1.4 million new jobs over 10 years.
The DOF reiterated this in 2019, raising the figure to 1.5 million jobs. The DOF said companies would invest at least 50 percent of their additional money from reduced CITs in growing their business, which would mean more jobs. The new tax perks would also encourage job creation, it said.
When asked on Monday how the DTI came up with the figures, Lopez said that they computed the job creation based on the premise that a typical investment creates a new job for every P100,000.
Lopez said the P200 billion in new investments came from discussions with companies. He did not elaborate. INQ