CREATE LAW INPUTS SET IN MEET
Finance Secretary Carlos Dominguez III wants the newly reconstituted Fiscal Incentives Review Board (FIRB) to meet at the earliest possible time to discuss the body’s expanded functions under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act once this law takes effect this month.
CREATE was signed into law by President Rodrigo Duterte as Republic Act (RA) No. 11534 on March 26, and published in a national newspaper on March 27, which makes it effective on April 11, or 15 days after publication in the official gazette or a newspaper of general circulation.
RA 11534 will take effect on April 12 because the 11th falls on a Sunday. The law’s implementing rules and regulations (IRR) is being finalized by the Department of Finance (DOF) and the National Tax Research Center (NTRC).
“I want to call a meeting right away,” Dominguez told Assistant Secretary Juvy Danofrata during a recent DOF executive committee (Execom) meeting.
Danofrata, who heads the Strategic, Economics and Results Group (SERG) of the DOF, said the meeting of the FIRB can be held as early as the week of April 12 given the effectivity of the law.
Dominguez said the new menu of generous corporate tax incentives to be offered under CREATE will enable the government to attract the right kind of investors to do business in the country, particularly those offering quality jobs and technology transfer, and introducing new industries that would allow the economy to flourish.
Dominguez chairs the reconstituted FIRB under the CREATE law with Department of Trade and Industry (DTI) Secretary Ramon Lopez as co-chairman.
CREATE is the largest fiscal stimulus program for the private sector in the country’s history, providing an estimated PHP1 trillion worth of tax relief to enterprises over the next 10 years.
In 2021 and 2022, the law is expected to provide tax savings to businesses totaling around PHP251 billion, which will help keep them afloat and retain jobs as they recover from the crippling effects of the pandemic-induced global economic upheaval.
The law provides an immediate 10 percentage-point reduction to the previous 30 percent corporate income tax (CIT) rate of domestic micro, small and medium enterprises (MSMEs) and a 5-percentage point cut for all other corporations, effective July 2020.
CREATE also redesigned the fiscal incentives system to make the grant of generous incentives to companies performance-based, time-bound, targeted, and transparent.
The CIT cut and the rationalization of the tax incentives system are aimed at helping the country attract high-value foreign direct investments (FDIs) by making the cost of doing business in the Philippines more competitive, especially at this time when the government is putting in place the country’s economic recovery program.
Under the CREATE law, the FIRB’s functions are expanded to cover not only tax incentives given to government-owned or -controlled corporations (GOCCs) but also those granted by investment promotion agencies (IPAs) and other state-run agencies to their respective registered business enterprises.
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