PCCI backs PEZA move to amend CREATE act

The country’s biggest business organization is backing measures to have the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law amended, citing that the tax reform law created difficulties for government-registered firms who want to be exempt from paying value-added taxes (VAT).

Philippine Chamber of Commerce and Industry (PCCI) president George Barcelon said they support the initiative from the Philippine Economic Zone Authority (Peza) to have the tax reform law reviewed during the next meeting of the Fiscal Incentives Review Board.

“If you’re with Peza and a local firm supplies you with some materials or components, those are subject to VAT. And it doesn’t provide you that clearly of an option not to pay. But if you are a firm that is BOI (Board of Investments)-registered, you’d get it clearly specified that you’re not subject to VAT,” Barcelon told the Inquirer in an interview last Monday.

The PCCI official said the availment of the zero VAT rating used to be simpler for Peza-registered firms, but have become more complicated under CREATE.

The CREATE Act limited the application of the tax perk to local purchases of goods that are exclusively and directly used in the registered project or activity of the registered firm.

This means that Peza-registered firms which used to enjoy the tax incentive now have to submit paperwork proving that they satisfied the conditions provided under the tax reform law.

Barcelon said that while Peza-registered firms could refund from the government their VAT payments on purchased goods, the procedure added another bureaucratic level to a previously straightforward availment of the tax perk.

“They have to show documents… to liquidate. I hope this can be simplified because we really want to make it easy for exporters by having less bureaucracy,” Barcelon said.

Last Friday, Peza Officer in Charge and Deputy Director General for Policy and Planning Tereso Panga told investors that the matter will be taken up during the next board meeting of the interagency government body which sets the government’s tax incentives policies.

Panga said they have received complaints from registered firms, some of which have filed cases with the Court of Tax Appeals to argue their respective cases.

The Peza head is also pushing for amendments to the law which created the investment promotion agency to make the line up of tax incentives they are offering more attractive to investors.