DOF-backed bill tweaking tax incentives to top Senate gab

Senators will hold a caucus on Monday to ensure that all priority measures are tackled and approved within the remaining tight schedule of the chamber in its last week before going on a scheduled break.

Top of the agenda, Senate President Vicente Sotto III said, is the Corporate Recovery and Tax Incentives for Enterprises (Create) Act, which will lower the corporate income tax (CIT) from the current 30 percent to 25 percent, while rationalizing fiscal incentives.

At the same time, Sotto III said in an interview with DWIZ, he sees the franchise of San Miguel Aerocity, the Bulacan airport project of the San Miguel Corp. (SMC) group, hurdling third-reading approval before session break.

According to Sotto, they set the session at 2 p.m., “so we can attend to housekeeping matters before going to the period of amendments for Create.”

He predicted “lengthy” deliberations on Create, noting that its sponsor, Senator Pia S. Cayetano, had expected “spirited discussions” by members.

If they cannot finish deliberations on Create by Monday night, Sotto expects the crucial tax reform to be finished nonetheless by Tuesday or Wednesday.

There is universal support for the CIT reduction, but the second plank of Create has divided government and business sectors, many of whom believe that “rationalizing”—or removing—fiscal incentives are ill-timed when economic sectors have been adversely impacted by the Covid-19 pandemic.

Sotto noted that Create, which has been pending in the Senate for eight months, was “certified as urgent since March.”

The certification of Create by the President would allow senators to skip the mandatory 3-day interval between the second reading and third reading. Sotto, nonetheless, expressed confidence of its passage.


Finance Secretary Carlos Dominguez III last week weighed in anew on the approval of Create, saying the reduction of the CIT means tax breaks for 99 percent of business enterprises, which are MSMEs.

“The small and medium enterprises in this country have never had a tax break. It’s the big ones that go and register with the Peza [Philippine Economic Zone Authority]” [that are given tax] incentives,” Dominguez told a recent briefing by the Development Budget Coordination Committee before the House appropriations committee.

The statement of the chief of the Department of Finance (DOF) was an apparent jab at ecozone locators, who have been most vocal in opposing Create because of its second plank, i.e., the tax perks reforms.

Dominguez said the passage of Create will align the corporate tax rate with the Association of Southeast Asian Nations (Asean) average and, thus, make the Philippines the only government to provide tax breaks to MSMEs.

Under the current system, about 3,000 big companies enjoy incentives that let them pay discounted tax rates of between 6 percent and 13 percent of net income only, while small enterprises that make up 99 percent of local businesses and employ majority of Filipino workers pay the regular CIT of 30 percent; the highest in the region. The CIT-cut alone will free up around P42 billion in capital for businesses in the first year of Create’s implementation, Dominguez said.


Meanwhile, despite its second-reading passage by the Senate last week, the franchise for SMC’s ambitious Bulacan airport continues to draw cautionary remarks from some sectors.

In a comment sent to media outlets, the nongovernment Action for Economic Reforms group lamented that calls to revisit the generous incentives given to the Aerocity proponent were ignored when Senators passed it on second reading.

Cayetano, head of the Senate Ways and Means Committee, had cautioned peers against rushing Aerocity’s incentives without considering these alongside the provisions of Create. She added this runs the risk of having two sets of incentives, with the aerocity proponent enjoying perks as a class of its own.

Cayetano had said she fully supports the setting up of an airport in Bulacan but wondered aloud why the franchise’s sponsor, Sen. Grace Poe, did not get the DOF comment on the matter of the special class of incentives.


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