The Philippine Chamber of Commerce and Industry (PCCI) expressed its support to Senate Bill 2654 or the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) bill aimed at addressing inconsistencies and gaps in previous law, CREATE.
In a letter to Sherwin Gatchalian, Senate Committee on Ways and Means chair, PCCI noted the inconsistencies in the CREATE Act and corresponding administrative issuances relating to taxes and incentives enjoyed in freeport and economic zones.
Administrative issuances implementing CREATE limited the applicability of the value-added tax (VAT) exemption on importation and VAT zero-rating on local purchases by a registered export enterprise.
PCCI said under the CREATE Act, such incentive is granted to registered business enterprises (RBEs) in general and does not make a distinction between an export enterprise and a domestic market enterprise inside separate customs territories.
The distinction made between between export and domestic enterprises has disadvantaged the latter as they have now ceased to avail of their incentives including the 5 percent tax on gross income earned (GIE) that they are supposed to enjoy for 10 more years as specified in the transitory provisions of the CREATE Law, PCCI said.
“This situation not only disincentivizes local suppliers of manufacturers inside freeport zones; it also puts manufacturers/exporters at a disadvantage as they must now absorb the VAT passed on to them by their local suppliers, and which they pass on to the consumers making them uncompetitive in the global market,” said PCCI president Enunina Mangio.
PCCI backs CREATE MORE’s intent to improve the country’s tax refund process, which currently takes an average of four to six years to process and approve.
Under the VAT refund process, any excess input VAT credit arising from zero-rated sales, or previously from significant capital expenditures, would have to be paid back by the government.
While the 1997 National Internal Revenue Code requires the Bureau of Internal Revenue to process VAT refund or tax credit claims within 90 days, processing and approving such claims have taken an average of four to six years.
“VAT refunds represent sums of money owed by the government to zero-rated taxpayers and investors, who already paid the VAT upfront on their purchases or investment. These are taxpayers’ money trapped with the government, idle, instead of being used to generate economic activities.
“Bureaucratic inefficiencies in the VAT refund system has resulted to higher costs of doing business in the country as compared with other countries vying for the same market or investment,” said Benedicta Du-Baladad, PCCI director.
