THE SENATE late Tuesday adopted and ratified a bicameral conference committee report on the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) bill, which seeks to lower taxes on domestic and foreign companies to 20% from 25%.
“We have come up with a piece of legislation that seeks to promote a more attractive investment climate by improving our tax incentives framework for registered business enterprises,” Senator Sherwin T. Gatchalian, who sponsored Senate Bill No. 2672 or the Senate’s version of CREATE MORE, told the plenary Tuesday evening, after legislators sitting in conference committee approved the reconciled version earlier in the day.
“It also aims to clarify and streamline existing rules and policies concerning the granting and administration of fiscal incentives.”
Earlier in the day, a House legislator had announced that the bicameral conference committee harmonizing the Senate and House versions of a key tax reform bill had agreed to adopt provisions in the House bill regarding fuel value-added tax (VAT) refunds and local taxes on economic zone locators, a House legislator said.
In a statement, Albay Rep. Jose Ma. Clemente S. Salceda said Senate representatives on the panel agreed to adopt his proposal to allow fuel suppliers serving tax-exempt entities to be eligible for tax refunds. They also agreed to allow local government units to set the local tax for registered business enterprises (RBEs) at up to 2% of gross income.
Mr. Salceda in late August rejected a Senate provision on value-added tax, saying it allows tariff- and VAT-free imports of petroleum products by international carriers. He also cited ambiguities in the provision on local taxes charged to RBEs, which he said could deter manufacturing investment.
“The House accepted all the Senate’s revisions,” Mr. Salceda added.
The bicameral conference committee’s approval of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) bill is a “big win for manufacturing,” according to Mr. Salceda, saying that the agreed-upon legislation resolves inconsistencies in the value-added tax clauses of the CREATE Act of 2021.
Ambiguities in the CREATE Act and its implementing rules and regulations led to misinterpretations in the law’s application, he said.
“It’s… a big win for manufacturing. We resolved their VAT issues, which cost some 120,000 jobs over the past three years,” Mr. Salceda said.
“We also addressed high power costs with the additional or enhanced deductions, basically making power cheaper by around P3 per kilowatt-hour (kWh) for manufacturing,” he added.
He said high power costs “are an existential threat to Philippine industries” as the government cannot afford to subsidize them.
RBEs are provided with a 100% deduction on power expenses incurred in a taxable year, from 50% previously, according to the CREATE MORE bicameral conference committee report.
The measure also addresses the changing global investment climate, such as China’s decline as a global manufacturing hub and the increase of fuel prices due to conflict in the Middle East, Mr. Salceda said. “In this regard, we cannot afford to bungle our tax treatment of investors.”
Under the measure, RBEs with a capital stock of over P15 billion will be granted VAT zero-rating on local purchases, VAT exemption on imports, and duty exemptions on imports of capital equipment, raw materials, spare parts and accessories.
The bill also proposes a cap of 2% on RBE local taxes based on gross income. RBEs will also be allowed to have a work-from-home setup for up to half of their workforce without losing their incentives. — Kenneth Christiane L. Basilio and John Victor D. Ordonez