BUSINESS groups are pushing for the immediate passage of a revised tax reform bill saying this will boost the recovery of firms reeling from the economic slowdown caused by the new coronavirus disease 2019 (COVID-19) pandemic.
Both the Makati Business Club (MBC) and the Philippine Chamber of Commerce and Industry (PCCI) believe the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) could attract investments into the Philippines.
PCCI president Benedicto Yujuico in a statement said the immediate reduction of the corporate income tax (CIT) from 30 percent to 25 percent will result to savings to enterprises which would help fund the continued operation of their businesses.
Yujuico said this enhancement, which will bring the Philippines’ CIT rate closer to the Asean average of 23 percent, will help draw in multinational firms seeking alternative sourcing markets and manufacturing bases.
He added the CREATE’s provision extending the applicability of the net operating loss carryover (NOLCO) for losses incurred in 2020 from the current three years to an extended five years will allow companies to deduct incurred losses from tax payments for a longer period, providing them more time to set their finances in order.
But Yujuico said the extension should be applicable to all firms, regardless of size to protect current employment saying the community quarantines have resulted to substantial losses across all industries and sectors.
He said the flexibility in granting fiscal and non-fiscal incentives will be critical as the country competes internationally for high-value investments.
“We support the proposed strategic, tailored approach to attracting potential investments that are uniquely deserving of incentives,” Yujuico said.
He said PCCI also welcomes the grant of a maximum transitory period of 9 years for businesses currently enjoying fiscal incentives as this will give them adequate time to make the necessary adjustments before finally shifting to the new tax regime.
But the MBC in a separate statement said the Department of Finance and Congress should add five years to the sunset provisions for existing investors, and offer new investors at least 10 years.
MBC said the passage of the CREATE bill will end two years of uncertainty for investors, which is all the more important now.
The group supports the Financial Incentives Review Board system for very large investments above certain set thresholds, such as size of investment and jobs saying proponents of such investments are more willing and able to negotiate, and that the government can and should give them special attention.
Like PCCI, MBC backs performance-based, targeted, time-bound, and transparent incentives and urged the government to codify these as soon as possible and then market them aggressively.
MBC said most investors decide by comparing packages offered by different countries and may bypass the Philippines if the process entails indefinite discussions with the government.
The group said Philippine Economic Zone Authority should take a lead role in attracting relocators due to its track record as one of the most successful investment generators of the country.
“We would support other improvements and initiatives to make the Philippines more compelling to new investors, including in the services industry, where our young and talented population is a global brand, still in light of the wave of relocators, and (the Philippines)’ neighbors’ intensified campaigns to attract them,” MBC said.
Yujuico said: “The damage COVID-19 and the corresponding lockdown imposed to mitigate its spread has seriously damaged the economy. The business sector needs the package of reforms introduced under CREATE to help businesses recover, ensure their resilience and create more sustainable economic opportunities.”
