THE chairman of the House Committee on Ways and Means on Wednesday called on the Executive Department to mobilize its allies in the Senate for the immediate passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
Albay Rep. Joey Sarte Salceda said the proposed CREATE is one of the “legislative imperatives” that Finance Secretary Carlos G. Dominguez identified for the country’s economic recovery.
According to Salceda, the -year loss in foreign direct investment due to delays in passing CREATE was between $6 billion and $12 billion.
Salceda said President Duterte and his Cabinet approved this Package 2 of the Comprehensive Tax Reform Program in January 2018 and the House was always quick to pass versions of this reform.
“The CREATE, which will reduce the corporate income tax to 25 percent on its first year, will jolt the markets out of its unjustified pessimism,” Salceda said.
The CREATE seeks an outright cut in the country’s CIT rate from 30 percent to 25 percent. The proposal further offers more flexible incentives, with an immediate 5 percent income tax slash, after which the CIT will be reduced by 1 percent every year from 2023 to 2027 until it reaches the 20-percent mark.
“Right now, the sentiment of many enterprises, including those who will almost certainly survive this pandemic, is profusely negative. There is a sense among them that some obviously beneficial government interventions are being delayed. Passing CREATE will end the pointless wait-and-see,” Salceda added.
According to Salceda, the government needs to be very aggressive with promoting the country as an investment destination.
“Now is the time to reorganize the global investment order in the country’s favor, when everything is still unsettled. There are many opportunities now that will never come again once things normalize,” he said.
“Market spirits are in stasis. CREATE will be that necessary push to get positive sentiment to snowball into something big towards the end of the year. The cost has already been around $6 billion to $12 billion in foregone foreign investments because of the two years of delay in passing this crucial reform. That has cost the Filipino people significantly. More delay will cost more growth,” Salceda added.
House will deliver
Salceda, meanwhile, said the House is ready and willing to “do its part” in getting what Finance Secretary Dominguez calls “legislative imperatives.”
Besides CREATE, the other legislative imperatives needed to spell a quick and strong bounce back for the economy are: infusing more capital to government financial institutions to enable them to assist micro, small and medium enterprises and other companies hit hard by the Covid-19 pandemic; allowing banks to dispose of non-performing loans and assets; and amending the Agri-Agra Reform Credit Act to make it easier for banks to pump fresh capital into the farm sector.
“In the House, we already passed versions of Secretary Dominguez’s requests for capital infusion for government financial institutions, and allowing banks to manage non-performing loans. As you know, we passed our version of CREATE in 2019. And we passed Agri-Agra amendments last March,” Salceda said. “If there are revisions that are needed, we are also ready. We’ve had marathon hearings on the economy, and if needed, we are ready to have them again,”
Salceda added.
Nonetheless, Salceda said, “we expect the executive to be reciprocally open to the inputs of the House.”
“We’ve done our study and our consultations, also. We have our inputs. My office, for its part, has released study after study, and proposal after proposal – some of which have been adopted. We expect the Executive to continue to show openness to refining the country’s recovery plan.”
Strong fundamentals
Saleda is confident the Philippines’s “strong fundementals” will help it rise after the pandemic. “As soon as we can stop hiding in the caves of bad news, and start focusing on what needs to get done, we will be able to recover,” Salceda said.
“We have very strong economic fundamentals. Once there is a vaccine, we will bounce back big. BSP says we will probably have 8 to 9 percent GDP growth by 2021. That is certainly achievable. So, let’s stop being at each other’s throats each time the cases rise, and start focusing on what is necessary: more tests, more isolation beds, protocols for outbreaks, and an assurance that we will mass-vaccinate when the vaccine is ready,” Salceda said.