The Senate on Friday committed to frontload passage of the second tax reform package, now known as Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) upon resumption of session in July, but explained that the bill needed thorough discussions that their June 5 deadline could not allow.
“While we see the merits of the measure, we are also committed to ensuring that the best version of the bill should pass the Senate—one that is truly responsive to the extraordinary needs of our time,” said the statement signed by 15 senators led by Senate President Vicente Sotto III a day after the chamber adjourned.
Congress is on break until July 27, when the President is to deliver his State of the Nation Address (SONA).
The 15 senators gave the commitment, through the office of Majority Leader Juan Miguel Zubiri, a day after more than a dozen former economic managers issued a statement pushing for CREATE’s immediate passage, lambasting the bill’s critics for their “rehashed” arguments against the bill, formerly known in pre-Covid as Citira (for Corporate Income Tax and Rationalization of Incentives Act).
The Department of Finance had been pushing the Senate to pass CREATE, saying it’s the best stimulus for businesses recovering from the Covid-19 pandemic’s devastation, but while its provision drastically cutting by 5 percent the CIT enjoys universal support, the other provision on incentives has stirred controversy.
At least 26 economists, including deans of some leading schools, had warned that rushing CREATE is ill-advised, as the incentives portions induce uncertainty and disruptions – the last thing recovering businesses need.
On Friday, the 15 senators led by Sotto said in their statement: “Rest assured that your legislators are working tirelessly in scrutinizing the measure in its finer points in order to craft and approve the most effective economic recovery plan possible.”
One possible area needing clarification from the Executive was raised by Sen. Juan Edgardo Angara in a marginal note to the statement of the 15 senators. He reminded “Neda to release a comprehensive study on incentives as required by TIMTA Law or RA 10708.”
The TIMTA Law of 2015 (or the Tax Incentives Management and Transparency Act), was enacted to enable government to monitor, review, and analyze the economic impact of tax incentives, or exclusions from the tax base, as provided by law, to registered business entities, according to Neda’s website.
While indicating that the incentives portion of CREATE would require more discussion that their tight deadline this week did not allow, the 15 senators nonetheless committed, “You also have our word that we will take up the bill upon resumption of the session in July and work to pass it by the month of August.”
The senators added, “In the midst of the COVID-19 pandemic, economies the world over are on the brink of collapse, with businesses needing massive government support in order to rebuild, recover, and retain jobs for their employees.”
The amendments in CREATE, they said, “address this need head-on, offering businesses an unprecedented and outright 5 percent tax cut, thereby reducing the Corporate Income Tax (CIT) rate from 30 to 25 percent. This reduced CIT rate will allow businesses to recoup the unanticipated losses they incurred during the various stages of community quarantine across the nation.”
The passage of CREATE “will be particularly vital to micro, small, and medium enterprises (MSMEs), which make up 99 percent of the nation’s corporate taxpayers and employ a majority of Filipino workers,” the senators added.
“We endeavored to pass CREATE with a mind for urgency. We regret, however, that we were unable to tackle this before the sine die adjournment on 5 June 2020, given the lack of material time, along with the pressing need to deliberate a plethora of other equally important national measures addressing the pandemic,” they said, referring to, among others, the extension of the Bayanihan Act to continue providing the Executive fiscal leeway to respond to the pandemic.
However, the Senate failed to pass Bayanihan 2 as well, after the Executive did not certify it as urgent, as the senators expected. The absence of certification prevented them from shortcircuiting the second- and third-reading approvals for Bayanihan 2.
The statement was signed by Senate President Vicente Sotto III, Senate President Pro Tempore Ralph Recto, Majority Leader Miguel Zubiri and Senators Pia Cayetano, Juan Edgardo Angara, Maria Lourdes Binay, Ronald de la Rosa, Christopher Go, Manuel Lapid, Emmanuel Pacquiao, Grace Poe, Ramon Revilla Jr., Francis Tolentino, Joel Villanueva and Cynthia Villar.
Image credits: Louie Sauro Millang/ Senate PRIB via AP
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