April 15 tax deadline stays while gov’t mulls options for corporate taxpayers to reflect CREATE relief

MANILA, Philippines — The April 15 deadline to file and pay income tax returns (ITRs) stays, giving limited time to corporate taxpayers which may scramble to adjust their 2020 payments to the lower rates provided as a relief amid the pandemic-induced recession under the newly signed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law.

While Albay Rep. Joey Salceda earlier proposed to extend the tax deadline given that the Congress-approved CREATE bill was transmitted to the Office of the President only early this year, the House ways and means committee chair told the Inquirer Saturday that “we need the cash” hence must stick to the cut-off date.

“We recommended it earlier in February, but the cash situation appears to be precarious. I will keep working with the Secretary of Finance [Carlos Dominguez III] on alternatives, perhaps other leeways,” Salceda said.

The government’s latest cash operations report showed that tax and non-tax revenues collected in January fell 11.5 percent to P260.7 billion from P294.6 billion a year ago or prior to the pandemic.

The economic team had programmed to collect P2.88 billion in revenues this year, slightly up from P2.86 last year but still below the record P3.14-trillion take in 2019.

Last Friday, Bureau of Internal Revenue (BIR) Deputy Commissioner Arnel Guballa said the decision on whether or not to adjust the tax deadline will come from the Department of Finance (DOF). His statement came on the heels of news that President Duterte signed CREATE just a day before it could have just lapsed into law without presidential action.

Sought to comment, Dominguez on Saturday replied: “What we could consider is allowing the amendment of returns without penalty, then any excess payments can be carried over or refunded as provided in the Tax Code.”

Last year, the BIR also issued guidelines that allowed the filing of tentative returns during the enhanced community quarantine (ECQ) imposed from mid-March until May last year so taxpayers can file and pay their returns at the height of the longest and most stringent COVID-19 lockdown in the region.

But the DOF and the BIR, later on, pushed back the April 15 deadline three times and gave taxpayers until June 15, 2020, to settle their 2019 dues.

As a result, tax collection lagged at the start of last year even as the government enjoined online as well as early filing among those who can afford to do so.

For 2021, Internal Revenue Commissioner Caesar Dulay had assigned the largest monthly collection target of P235.24 billion in April, as the mandatory income tax filing and payment deadline falls on that month.

For his part, Salceda said he “will ask for exactly what Secretary Dominguez said was acceptable — if we cannot have an extension in form, we can have an extension in consequence.”

“The consequence of the tax deadline is penalties and surcharges. We can apply penalties and surcharges only after some time post-deadline, perhaps by May 15. We can also credit any excess tax payments to later quarters. Anyway, we are bound to do that with some of the provisions CREATE changed, like MCIT [minimum corporate income tax], some of which have already been remitted under pre-CREATE rates,” Salceda said.

“I will also ask the BIR to ensure there are no hiccups on the online filing systems and the queues,” Salceda added.

CREATE Law retroactively reduced the income tax rate slapped on firms to 25 percent effective July 2020, from 30 percent previously — which was the highest in Asean. It also slashed to an even lower 20 percent the levy on micro, small and medium enterprises (MSMEs).

In anticipation of the enactment of CREATE into law, the BIR already crafted the implementing rules and regulations (IRR), which were ready for publication as soon as the law took effect, a DOF official said.

Last Friday, Dominguez told Filipino and Singaporean businessmen that CREATE was the Philippines’ “biggest stimulus program ever for businesses” as they “can avail of lower corporate income taxes and other benefits to aid in their recovery or plan for their expansion.”

“With CREATE, we are leaving money in the private sector’s hands to revitalize their businesses. We trust that enterprises will reinvest their tax savings from CREATE back into the economy to spur domestic activity and create more jobs for our people,” Dominguez said.

“In addition, this measure proposes more flexibility in granting fiscal and non-fiscal incentives. This will create an enhanced incentives package that is performance-based, time-bound, targeted, and transparent,” Dominguez added.

Across several administrations, the DOF had long been pushing to reform the corporate taxation regime, although past attempts had focused on rationalizing the generous tax incentives that investors enjoyed when they locate in economic zones, which in turn resulted in billions of pesos in foregone revenues for the government.

Just within a few months after President Duterte assumed office in mid-2016, Dominguez and then DOF Undersecretary Karl Kendrick Chua pitched to Congress the administration’s comprehensive tax reform program — comprehensive in the sense that it was aimed at easing the income — tax burden on individuals and firms while at the same time slapping a new or higher levy on consumption.

In the case of businesses, the Duterte administration’s second tax package wanted to gradually reduce the corporate income tax rate from 30 percent — the highest in Asean, while also making the fiscal perks time-bound and performance-based instead of almost perpetually available.

While several tax packages were already legislated — the Tax Reform for Acceleration and Inclusion Act or TRAIN Law, the ongoing amnesties on delinquencies and estate taxes, as well as further hikes in “sin” taxes slapped on cigarettes, e-cigarettes, and alcoholic drinks — corporate income tax reform lagged behind as legislators dragged their feet, fearing that taking away tax perks may also shoo foreign investors away and shed thousands of jobs.

Prior to the COVID-19 pandemic, the bill had several reincarnations — it was first called Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) Act during the 17th Congress, and then christened by Salceda as CITIRA or Corporate Income Tax and Incentives Reform Act in the current 18th Congress.

When the Philippines slid into a pandemic-induced recession last year, the DOF and Congress agreed to again tweak the bill — such that CREATE bill was then attuned to the harder times as businesses struggled while investments hit a standstill due to economic uncertainty.

This was why CREATE granted a bigger tax-reduction on small businesses to 20 percent while also granting corporations a one-time, big-time cut to 25 percent retroactively applied to July 2020, instead of the earlier plan to gradually reduce rates as the DOF wanted to minimize foregone revenues.

CREATE would also give the President power to give away hefty fiscal incentives that should attract elephant-sized investments.

Chua, who’s now Acting Socioeconomic Planning Secretary and head of the state planning agency National Economic and Development Authority (Neda), had repeatedly said that CREATE formed part of the recovery package so the economy could rebound from last year’s worst post-war recession, as it would contribute P133 billion in fiscal stimulus equivalent to 0.67 percent of gross domestic product (GDP) this year.

/MUF