NEW PHILIPPINE TAX BILL PURPORTS TO ‘HELP’ MSMEs PAY LOWER RATES
A controversial new tax reform bill in the Philippines has been passed off as a measure meant to help smaller local food and beverage enterprises to pay lower taxes and stop larger firms from exploring existing system loopholes in the wake of the COVID-19 pandemic outbreak, Pearly Neo of FoodNavigator Asia reported on July 21, 2020.
Despite all the fluffing and tongue bath for the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) by Finance Undersecretary Antonio Lambino, critics insist CREATE will go the same route as the expanded VAT LAW, TRAIN Law and others that pampered the rich, increased the tax rate and punished the poor by increasing the duty on imported ingredients for beverages and other basic commodities. According to an Asia Pacific Foundation of Canada report, more than 890,000 firms in the Philippines are MSMEs and around 31,000 of these are engaged in food manufacturing, particularly in food and food preparation, coconut products and seaweed/carrageenan production.
The proposed new bill, termed the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), is targeted at reallocating tax incentives and reducing Corporate Income Tax (CIT) rates claimed Lambino, a lawyer who was once a member of the musical group Smokey Mountain. Large companies have never had it so good under the Duterte administration since they can pay only between 6% and 13% of their taxes and spend less than 6% of their cash for payroll. “Overall DOF research found that at present, of P441 billion ($8.9-B) given in tax incentives, just 3,150 of over 980,000 firms in the country were benefitting from these, most of which were not MSMEs,” added Lambino.
In a virtual briefing with COVID-19 Action Network (CAN) Phlippines, Lambino said that micro, small and medium enterprises (MSMEs) in industries such as food and agriculture were losing out under the current tax structure by paying more taxes than bigger firms. “Companies that are paying taxes without any incentives provided to them by the government are paying at a 30% tax rate – and that’s what just about all of the MSMEs in the country across industries [from agriculture to F&B] are paying,” he said. Local economists have come forth to oppose CREATE, calling for more focus on the current pandemic crisis instead. Ateneo School of Government Dean Ronald Mendoza presented a paper to the Philippines Senate Committees on Finance and Economic Affairs last month saying that CREATE is “too complicated” an endeavour to be implemented given the unresolved COVID-19 situation. “Given [that COVID-19 is] staring us in the face right now, the de facto reform legacy of this administration should be Universal Health Care and social protection which can use further boosting and strengthening during this pandemic,” Mendoza said.