Investors seek 5-year tax relief under CREATE bill

LOCAL and foreign investors have sought a five-year exemption from paying new taxes under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) bill to give them time to recoup losses from the Covid-19 pandemic.

Industry groups on Monday asked President Duterte and legislators to consider the impact of the health crisis on business operations before approving the CREATE bill. Should the measure be enacted into law, they said cost of doing business will balloon in a time it should be brought down due to the pandemic.

“The pandemic has raised production costs for export firms, whose foreign markets have been badly impacted with depressed economic growth and massive employee layoffs,” the business groups said in a statement.


As such, they appealed to policy-makers to exempt them for up to five years from paying the additional taxes that will come along the passage of CREATE bill. Likewise, they reiterated they prefer maintaining the status quo to keep on enjoying fiscal incentives as proposed by Senate President Pro Tempore Ralph G. Recto.

Investors said they agree with Recto’s push to retain the incentives of export firms, as shifting them to the CREATE bill’s fiscal regime will only double their taxes.

As a consequence, exporters—most of which are multinationals—may pack up their operations here and relocate to another investment site. In the case of Lipa, Batangas, where Recto hails from, this could mean job losses for at least 60,000 workers.

“[Recto] is concerned these firms will leave, more firms will not invest, and Lipa will have fewer instead of more workers employed,” industry groups said.

They also said the CREATE bill should include a provision allowing existing investors to register expansion activities and renew incentives. They argued this was promised to the private sector by Albay Rep. Joey S. Salceda and Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua, when he was Finance undersecretary.

The business groups said permitting existing investors to register their expansion projects and renew tax perks will encourage foreign investments into the Philippines, as well as uphold the government’s goal of making the grant of incentives time bound and performance based.

If passed into law, the CREATE bill will bring down corporate income tax to 25 percent, from 30 percent, on one hand. On the other hand, it will rationalize incentives, including the 5-percent tax on gross income earned paid in lieu of all local and national taxes, granted to investors.

As a whole, the industry groups who signed the statement are made up of about 3,000 firms, in manufacturing and business-process outsourcing, employing nearly 2 million workers.

The statement was signed by members of the Joint Foreign Chambers of the Philippines. The Confederation of Wearable Exporters of the Philippines, Information Technology and Business Process Association of the Philippines, Makati Business Club, Management Association of the Philippines, Philippine Ecozones Association, Semiconductor and Electronics Industries in the Philippines Foundation Inc. and the US-Asean Business Council signed the statement as well.

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