Congressmen and senators yesterday approved in the bicameral level the reconciled version of the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which the chair of the House committee on ways and means said will be the “greatest economic reform” after the 1986 EDSA revolution.
Albay Rep. Joey Salceda said lawmakers approved the disagreeing provisions of House Bill No. 4157 and Senate Bill No. 1357 and agreed to have it ratified within 24 hours.
“This will be the greatest economic reform of the post-EDSA years, second only to economic amendments to the Constitution. Removing the uncertainty will be like opening the floodgates to investment,” said Salceda who expects at least P12 trillion in combined domestic and foreign direct investments (FDIs) over the next decade due to the enactment of the CREATE law alone. Of that, $90 billion will be FDIs.
Salceda said CREATE will generate around 1.8 million jobs over the next 10 years and if combined with the proposed economic amendments to the Constitution “to maximize impact, we can produce some 8.4 million jobs.”
CREATE would reduce the corporate income tax (CIT) rate for large corporations from 30 percent to 25 percent and micro, small and medium scale enterprises’ (MSMEs) to just 20 percent, the biggest stimulus ever for businesses.
Camarines Sur Rep. Luis Raymund Villafuerte, a principal author of the bill, said the hefty CIT cut will be essential to economic recovery, considering that MSMEs comprise 99 percent of local enterprises and employ almost 70 percent of the country’s workers.
Villafuerte agreed with Finance Secretary Carlos Dominguez III who recently told the House committee on constitutional amendments Congress can help speed up economic recovery by passing the CREATE and the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic RecoveryAct as stimulus packages.
“These bills should be our doables this year in lieu of chacha (charter change),” said Villafuerte, who earlier called on the administration to temporarily shelve Charter change deliberations so it could focus on its pandemic response.
Salceda said the approval of CREATE ends investor uncertainty on the country’s fiscal regime.
Since it took Congress some time to come up with a consensus version, he noted government lost $18 billion in potential FDIs from 2018 to 2020.
“The bleeding stops now,” he told the bicameral panel. “Fixing the incentives regime to make it more performance-based is also crucial. The current investment priorities plan covers some 70 percent of GDP,” Salceda added in his remarks to the committee.
Salceda added while CREATE will result in some P931 billion in tax savings for businesses, this is to frontload relief and cover the economic gap brought about by the COVID-19 pandemic, the vaccines for which will be duty-free under the proposed law.
He noted the final bicameral version was able to shave off P282 billion from the original revenue loss under the Senate version.