Registered business enterprises (RBEs) in the Philippines, which received P140-billion incentives between 2016 and 2018 from the 13 investment promotion agencies (IPAs) contributed anywhere from 8.38 to 9.81 percent to the gross domestic product (GDP) in those years, according to the National Economic and Development Authority (NEDA).
In a related development, 12 business groups in a statement yesterday urged Congress to consider including in the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) three important provisions: grandfathering of incentives that will retain incentives to existing investors; allowing RBEs to avail of incentives for their existing and expansion export activities; and accelerating the reduction in corporate income tax until it reaches 20 percent in 2025 instead of 2027.
A report of the NEDA pursuant to the Tax Incentives Management Transparency Act on 1,687 respondent RBEs highlighted the contribution of these companies to GDP based on their domestic and export sales through the period under review of P1.2 trillion, P1.48 trillion and P1.71 trillion in 2016, 2017 and 2018, respectively.
The report noted the high capital intensity of these RBEs with stockholders’ equity nearly a trillion pesos by the end of 2018 or about 5.71 percent of the total stock capitalization of listed companies.
Stockholders equity represents retained earnings that serve as additional resources for expansion or reinvestment which add to the country’s capital stock.
Based on the report, the RBEs’ contributed capital in 2016 amounted to P493 billion, slightly lower to P350.71 billon by 2017 and jumping to P509 billion by 2018. Retained earnings amounted to P290.63 billion, P583.30 and P412.49 billion, respectively.
Stockholders equity thus summed up to P784 billion in 2016, increasing to P934 billion in 2017 and P923 billion in 2018.
The amounts roughly represent 5.4 percent, 5.1 percent and 5.17 percent in 2016, 2017 and 2018, respectiely of total capitalization of listed companies for those years.
Those numbers are huge considering only between .17 and .19 percent of the total RBEs of the IPAs were covered by the survey.
The report, dated July 2020, comes at a time when the Senate is expected to complete the period of interpellation and proceed to introduction of amendments to the CREATE bill.
Meanwhile, the business groups said the grandfathering of incentives will ensure retention of competitiveness of the industries engaged in export activities such as manufacturing, business process outsourcing, and shared services.
CREATE, they said, should clarify that existing RBEs can register their expansion or renew their incentives to send a clear message to existing foreign investors their continued stay in the Philippines will be mutually beneficial.
They added the CIT rate reduction to 20 percent in 2025, two years sooner than 2027,
would bring the Philippines closer to the Asean average sooner and provide substantial further relief to the country’s pandemic-stressed corporations. (I. Isip)
