A TRADE official on Tuesday asked business groups to take advantage of the new fiscal structure by applying for subsidy packages from the President to support the growth of industries.
At the Arangkada Philippines Forum 2020, Trade Undersecretary Rafaelita M. Aldaba explained investors can exploit Section 301 of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill. Under the provision, the President can modify the mix, period and manner of fiscal incentives extended to specific projects and industries.
Aldaba said investors can use this portion of the measure to request from the President any incentive they need for their activity in the Philippines to succeed.
As such, Aldaba pointed out Section 301 can pave the way for the creation of programs similar to the Comprehensive Automotive Resurgence Strategy (CARS), a program that grants fiscal support of up to P9 billion to participating manufacturers for a period of six years.
On the other hand, participants need to invest in model production here, comply with the output requirement of 200,000 units and buy their components from domestic suppliers.
“I think we need to take the law in its totality. At the same time, I think we can really make use of it in order to allow us to come up with programs that are tailored to the characteristics and types of problems an industry has,” Aldaba argued.
The trade executive said the CREATE bill can address the need to widen the set of incentives to accommodate the varying issues and challenges of every industry.
Seipi: Section 301 limited
Danilo C. Lachica, president of the Semiconductor and Electronics Industries in the Philippines Foundation Inc., disputed Aldaba’s pitch to capitalize on Section 301 and said the provision can only do so much. At the end of the day, the CREATE bill offers a tax break shorter by nearly half of what Vietnam provides, he pointed out.
“If we are competing against Vietnam, we will have to do more than what we have on the table right now,” Lachica said.
Whereas Manila can award just up to seven years of income tax holiday (ITH), Lachica reported Hanoi can counter that with a maximum of 13 years ITH. Likewise, he said the government has yet to resolve investor issues on the lack of infrastructure, cost of power and logistics, as well as the speed of Internet here.
The CREATE bill brings down corporate income tax to 25 percent, from 30 percent—the highest rate among Southeast Asian economies.
However, the measure also lifts the incentives, including the 5-percent tax on gross income paid in lieu of all local and national taxes, being enjoyed by investors. Firms are provided with up to 10 years to give up their tax perks, by then the new set of incentives takes effect.