ON the last session day of Congress before a seven-week adjournment, the debate over the second tax reform package—now called Corporate Recovery and Tax Incentives for Enterprises Act (CREATE)—heated up with government economic managers, economists and industrialists weighing in in favor of the measure. Several business groups also sought its early passage.
The former economic managers’ group chided critics of the proposal for “rehashing old arguments and delaying what we know to be a necessary boost” for the country’s early economic recovery. Their statement comes days after 26 economists, including deans from leading schools, warned against rushing CREATE’s passage, saying it infuses renewed, needless uncertainty among businesses seeking to recover from the devastation of the Covid-19 pandemic and its lockdowns.
The 17 signatories issued a joint statement seeking the swift congressional passage of the second package of the Comprehensive Tax Reform Program, formerly known as the Trabaho bill, then renamed Corporate Income Tax and Incentives Rationalization Act (Citira), before its incarnation as CREATE.
‘Necessary policy’
They argued that this is a “necessary policy” for retaining and creating jobs in light of the economic impact of the Covid-19 pandemic,
disputing the view of critics that passing CREATE could deepen the disruptions suffered by businesses, especially the small ones.
“We, former Secretaries of Finance, former Socioeconomic Planning Secretaries, and Filipino economists, reiterate our support for the immediate passage of the Corporate Recovery and Tax Incentives for Enterprises Act, formerly known as the Corporate Income Tax and Incentives Reform Act, as a much-needed boost to the recovery of the Philippine economy, and as a necessary policy tool for retaining and creating jobs that will help our people secure their livelihoods against the adverse impacts of Covid-19,” read the joint statement released on June 3 but was only sent to the media on Thursday by the Department of Finance.
In their joint statement, the group pointed out that “even sectors that had made known their reservations in the past have signified qualified support for its [CREATE] urgent enactment.”
The 17 signatories also warned against delaying the passage of the reform, adding that “during crisis periods, inaction on crucial reforms leads to even greater cost to society.”
“The shift in industry sentiment toward CREATE demonstrates what the undersigned have always asserted: that any delay in passing the reform causes undue business uncertainty, and costs the Filipino people inordinate amounts of foregone opportunities for better jobs and better business prospects,” the statement read.
“What we do in the coming weeks will be recorded in historical accounts of this challenging period and what will follow. Let it not be said by future generations that we spent the most crucial days rehashing old arguments and delaying what we know to be necessary. Responding to this crisis effectively and efficiently includes passing CREATE into law on behalf of the Filipino people,” it added.
The signatories also argued the outright 5-percent cut in the corporate income tax from the current 30 percent to 25 percent as early as July this year under the measure “strikes a good balance between the fiscal needs of our country and the need to support businesses,” including micro, small and medium enterprises (MSMEs).
“The reduction in the tax rate will provide businesses more resources to pay for their expenses and keep their employees. The rate reduction could be conditional on job retention or creation. The immediate cut sends a strong, clear signal to both the local and international business community that the Philippines is serious about competing for investments,” it said.
Aside from the reduction in the CIT under CREATE, the pending bill also seeks to extend the net operating loss carryover (Nolco) from the current three years to five years.
The Nolco benefit, they said, will “provide more businesses more resources to pay for their expenses” and help protect the employment of hundreds of thousands of Filipino workers.
The group also backed the CREATE provision that empowers the President, upon the recommendation of the Fiscal Incentives Review Board (FIRB), to grant longer incentives or additional nonfiscal incentives to investments that have a massive positive impact on the economy, saying this “repositions the country to compete for investments.”
Signatories to the new joint statement include former Bangko Sentral ng Pilipinas (BSP) Gov. Amando Tetangco Jr.; former Finance Secretaries Roberto de Ocampo, Margarito Teves, Jose Camacho and Jose Pardo; former Prime Minister Cesar Virata; Monetary Board (MB) member and former Socioeconomic Planning Secretary Felipe Medalla; former Socioeconomic Planning Secretary and Ateneo professor Cielito Habito; MB member Bruce Tolentino; former Finance Undersecretary and Foundation for Economic Freedom (FEF) vice chairman Romeo Bernardo, former UP Los Baños vice chancellor and current Asian Development Bank Institute (ADBI) board member Fermin Adriano; dean Joel Tan-Torres and tax and incentives policy experts professor emeritus Epictetus Patalinghug of the University of the Philippines (UP) Virata School of Business and professor Renato Reside of UP School of Economics (UPSE), UPSE Alumni Association (UPSEAA) president Jeffrey Ng, former Philippine Institute of Development Studies (PIDS) president Gilberto Llanto, and Action for Economic Reforms (AER) coordinator Filomeno Sta. Ana III.
The joint statement came on the heels of another statement of support for CREATE from over 30 of the largest business and professional organizations in the country. They called on Congress to act “quickly and decisively” in restoring market confidence and providing the “most direct, cost-efficient and instant relief” to enterprises suffering from the coronavirus pandemic’s economic fallout.
Senate runs out of time
At the Senate, however, where Citira had been pending since the House approved it in September 2019—with Citira being overtaken by Salceda’s new version of the Covid-era CREATE—senators focused on extending the Bayanihan Act to give the Executive wide fiscal leeway in providing funds to the hardest hit sectors.
Senators late Wednesday approved the Bayanihan to Recover As One Act on second reading, and were expected to pass it on third and final reading on Thursday.
They opted to, meanwhile, steer clear of sharp divisions over CREATE, signaling it’s only Bayanihan that is the utmost priority as Congress, set to adjourn this week, resumes sessions on July 27.
“Let them fight it out first,” Senate President Vicente Sotto III told the BusinessMirror in a text message, when sought for reaction to the position paper of 26 economists who said earlier that passing CREATE now is ill-timed. “Hayaan mo munang mag-away sila nung mga in favor,” the Senate leader added, noting the full-page newspaper advertisement to drum up support for the bill.
The Trade and Commerce panel’s chief, Sen. Aquilino Pimentel III, however, thinks the break will enable lawmakers to review the proposal.
“We have time to study CREATE,” Pimentel said in a text message to the BusinessMirror.
Senate President Pro Tempore Ralph Recto said he will “present my amendments when we tackle substitute CREATE bill at the Senate.” Asked for comment on the 26 economists’ warning against rushing CREATE, Recto said, “most if not all of my amendments address those concerns.”
To complaints that the Senate had long sat (eight months) on the measure, Sen. Imee Marcos, who chairs the Economic Affairs committee, noted that the version had been changed several times, thus requiring further study each time the measure is tweaked.
On Thursday, she reiterated her position, as told in an exclusive BusinessMirror story, to split the measure into two in order to hasten passage of the first major plank, for which there is universal support—the reduction in corporate income tax from 30 percent to 25 percent this year.
“The reality is it’s the last session before adjournment, just no time left and the critical Bayanihan extension remains pending,” Marcos told the BusinessMirror, adding: “I earlier recommended that CREATE should be split into at least two separate bills: CIT, which can be passed immediately, then [followed later by] a separate incentives bill which, given the depressed economic context, requires serious re-evaluation and debate. Inspiring confidence is a tricky business, and misjudged timing, in addition to conflicted messaging, could be catastrophic.”
The view vs CREATE
Earlier this week, at least 26 economists argued in a joint statement that the revenue loss to the government resulting from the cut in the CIT reduction is not worth the price, saying that this “tax relief” would leave out MSMEs and will not likely deliver extra income growth and investment from large corporations given the shock to aggregate demand triggered by the pandemic.
The bill also sends a message of uncertainty to existing locators in the Philippine Economic Zone Authority, aggravating their financial situation due to the pandemic, they said.
IBON Foundation Executive Director Sonny Africa also earlier lamented that the government is “giving up P667 billion in potential Covid-19 response funds to boost corporate profits” through CREATE bill and the poor is being made to pay for the “meager” Covid-19 response through debt and the proposed “higher consumption taxes.”
President Duterte has certified the bill as urgent and the President’s economic team already appealed to lawmakers to pass CREATE before the sine die adjournment of Congress.
In a worst-case scenario where it is not passed by June 5, the President should call on Congress to convene a special session for the purpose, according to House Ways and Means Committee chairman Joey Salceda.
The former economic managers’ group chided critics of the proposal for “rehashing old arguments and delaying what we know to be a necessary boost” for the country’s early economic recovery. Their statement comes days after 26 economists, including deans from leading schools, warned against rushing CREATE’s passage, saying it infuses renewed, needless uncertainty among businesses seeking to recover from the devastation of the Covid-19 pandemic and its lockdowns.
The 17 signatories issued a joint statement seeking the swift congressional passage of the second package of the Comprehensive Tax Reform Program, formerly known as the Trabaho bill, then renamed Corporate Income Tax and Incentives Rationalization Act (Citira), before its incarnation as CREATE.
‘Necessary policy’
They argued that this is a “necessary policy” for retaining and creating jobs in light of the economic impact of the Covid-19 pandemic,
disputing the view of critics that passing CREATE could deepen the disruptions suffered by businesses, especially the small ones.
“We, former Secretaries of Finance, former Socioeconomic Planning Secretaries, and Filipino economists, reiterate our support for the immediate passage of the Corporate Recovery and Tax Incentives for Enterprises Act, formerly known as the Corporate Income Tax and Incentives Reform Act, as a much-needed boost to the recovery of the Philippine economy, and as a necessary policy tool for retaining and creating jobs that will help our people secure their livelihoods against the adverse impacts of Covid-19,” read the joint statement released on June 3 but was only sent to the media on Thursday by the Department of Finance.
In their joint statement, the group pointed out that “even sectors that had made known their reservations in the past have signified qualified support for its [CREATE] urgent enactment.”
The 17 signatories also warned against delaying the passage of the reform, adding that “during crisis periods, inaction on crucial reforms leads to even greater cost to society.”
“The shift in industry sentiment toward CREATE demonstrates what the undersigned have always asserted: that any delay in passing the reform causes undue business uncertainty, and costs the Filipino people inordinate amounts of foregone opportunities for better jobs and better business prospects,” the statement read.
“What we do in the coming weeks will be recorded in historical accounts of this challenging period and what will follow. Let it not be said by future generations that we spent the most crucial days rehashing old arguments and delaying what we know to be necessary. Responding to this crisis effectively and efficiently includes passing CREATE into law on behalf of the Filipino people,” it added.
The signatories also argued the outright 5-percent cut in the corporate income tax from the current 30 percent to 25 percent as early as July this year under the measure “strikes a good balance between the fiscal needs of our country and the need to support businesses,” including micro, small and medium enterprises (MSMEs).
“The reduction in the tax rate will provide businesses more resources to pay for their expenses and keep their employees. The rate reduction could be conditional on job retention or creation. The immediate cut sends a strong, clear signal to both the local and international business community that the Philippines is serious about competing for investments,” it said.
Aside from the reduction in the CIT under CREATE, the pending bill also seeks to extend the net operating loss carryover (Nolco) from the current three years to five years.
The Nolco benefit, they said, will “provide more businesses more resources to pay for their expenses” and help protect the employment of hundreds of thousands of Filipino workers.
The group also backed the CREATE provision that empowers the President, upon the recommendation of the Fiscal Incentives Review Board (FIRB), to grant longer incentives or additional nonfiscal incentives to investments that have a massive positive impact on the economy, saying this “repositions the country to compete for investments.”
Signatories to the new joint statement include former Bangko Sentral ng Pilipinas (BSP) Gov. Amando Tetangco Jr.; former Finance Secretaries Roberto de Ocampo, Margarito Teves, Jose Camacho and Jose Pardo; former Prime Minister Cesar Virata; Monetary Board (MB) member and former Socioeconomic Planning Secretary Felipe Medalla; former Socioeconomic Planning Secretary and Ateneo professor Cielito Habito; MB member Bruce Tolentino; former Finance Undersecretary and Foundation for Economic Freedom (FEF) vice chairman Romeo Bernardo, former UP Los Baños vice chancellor and current Asian Development Bank Institute (ADBI) board member Fermin Adriano; dean Joel Tan-Torres and tax and incentives policy experts professor emeritus Epictetus Patalinghug of the University of the Philippines (UP) Virata School of Business and professor Renato Reside of UP School of Economics (UPSE), UPSE Alumni Association (UPSEAA) president Jeffrey Ng, former Philippine Institute of Development Studies (PIDS) president Gilberto Llanto, and Action for Economic Reforms (AER) coordinator Filomeno Sta. Ana III.
The joint statement came on the heels of another statement of support for CREATE from over 30 of the largest business and professional organizations in the country. They called on Congress to act “quickly and decisively” in restoring market confidence and providing the “most direct, cost-efficient and instant relief” to enterprises suffering from the coronavirus pandemic’s economic fallout.
Senate runs out of time
At the Senate, however, where Citira had been pending since the House approved it in September 2019—with Citira being overtaken by Salceda’s new version of the Covid-era CREATE—senators focused on extending the Bayanihan Act to give the Executive wide fiscal leeway in providing funds to the hardest hit sectors.
Senators late Wednesday approved the Bayanihan to Recover As One Act on second reading, and were expected to pass it on third and final reading on Thursday.
They opted to, meanwhile, steer clear of sharp divisions over CREATE, signaling it’s only Bayanihan that is the utmost priority as Congress, set to adjourn this week, resumes sessions on July 27.
“Let them fight it out first,” Senate President Vicente Sotto III told the BusinessMirror in a text message, when sought for reaction to the position paper of 26 economists who said earlier that passing CREATE now is ill-timed. “Hayaan mo munang mag-away sila nung mga in favor,” the Senate leader added, noting the full-page newspaper advertisement to drum up support for the bill.
The Trade and Commerce panel’s chief, Sen. Aquilino Pimentel III, however, thinks the break will enable lawmakers to review the proposal.
“We have time to study CREATE,” Pimentel said in a text message to the BusinessMirror.
Senate President Pro Tempore Ralph Recto said he will “present my amendments when we tackle substitute CREATE bill at the Senate.” Asked for comment on the 26 economists’ warning against rushing CREATE, Recto said, “most if not all of my amendments address those concerns.”
To complaints that the Senate had long sat (eight months) on the measure, Sen. Imee Marcos, who chairs the Economic Affairs committee, noted that the version had been changed several times, thus requiring further study each time the measure is tweaked.
On Thursday, she reiterated her position, as told in an exclusive BusinessMirror story, to split the measure into two in order to hasten passage of the first major plank, for which there is universal support—the reduction in corporate income tax from 30 percent to 25 percent this year.
“The reality is it’s the last session before adjournment, just no time left and the critical Bayanihan extension remains pending,” Marcos told the BusinessMirror, adding: “I earlier recommended that CREATE should be split into at least two separate bills: CIT, which can be passed immediately, then [followed later by] a separate incentives bill which, given the depressed economic context, requires serious re-evaluation and debate. Inspiring confidence is a tricky business, and misjudged timing, in addition to conflicted messaging, could be catastrophic.”
The view vs CREATE
Earlier this week, at least 26 economists argued in a joint statement that the revenue loss to the government resulting from the cut in the CIT reduction is not worth the price, saying that this “tax relief” would leave out MSMEs and will not likely deliver extra income growth and investment from large corporations given the shock to aggregate demand triggered by the pandemic.
The bill also sends a message of uncertainty to existing locators in the Philippine Economic Zone Authority, aggravating their financial situation due to the pandemic, they said.
IBON Foundation Executive Director Sonny Africa also earlier lamented that the government is “giving up P667 billion in potential Covid-19 response funds to boost corporate profits” through CREATE bill and the poor is being made to pay for the “meager” Covid-19 response through debt and the proposed “higher consumption taxes.”
President Duterte has certified the bill as urgent and the President’s economic team already appealed to lawmakers to pass CREATE before the sine die adjournment of Congress.
In a worst-case scenario where it is not passed by June 5, the President should call on Congress to convene a special session for the purpose, according to House Ways and Means Committee chairman Joey Salceda.
