THE delay in enactment of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill is seen to threaten employment and investment inflow.
With this, financial technology (fintech) group FintechAlliance.PH and 43 other private business groups are calling for the immediate enactment of the tax reform law.
“Every day of delay comes at the risk of losing more jobs and hemorrhaging more investments,” their joint statement said.
“CREATE is a historic economic reform, one of the largest in decades. As a stimulus package, CREATE will be a boost to market confidence, providing instant relief to businesses suffering from business reverses due to the Covid-19 pandemic,” said the groups, which included a diverse range of business associations such as the Bankers Association of the Philippines, Management Association of the Philippines, Philippine Franchise Association, Philippine Life Insurance Association and the Money Market Association of the Philippines.
“We particularly support the immediate reduction of corporate income tax [CIT] rate from 30 to 20 percent for small and medium enterprises earning net taxable income not exceeding 5 million pesos, and from 30 to 25 percent for all other corporations, effective July 1, 2020,” said the groups. “These would instantly bring the country’s CIT rate closer to the Asean average of 21.65 percent and give us more resources to retain our employees and to keep up with financial difficulties. As an investment-attracting move, the CIT cut also alters the financial prospectus of the Philippines for the better.”
The groups expressed hope “the proposal to give flexible authority to the Fiscal Incentives Review Board [FIRB] and the President in granting both fiscal and non-fiscal incentives will make the tax incentives system an agile mechanism that can seize high-value investment opportunities.”
While thanking Congress “for including proper safeguards against prevent abuse of discretion or making it a political tool to grant favors to undeserving recipients,” the groups urged both chambers—now locked in bicameral conference deliberations—“to move quickly and decisively to push CREATE forward and ensure its immediate enactment.”
FintechAlliance’s pitch
FintechAlliance.PH Chairman Angelito M. Villanueva, in a statement on Thursday, said that granting fiscal and non-fiscal incentives can attract more investments into the Philippines.
In 2021 and 2022, the forgone revenues arising from lower CIT are estimated at P97.2 billion and P107.6 billion, respectively, according to the Finance department.
The tax reduction is seen helping the companies to channel more funds into their operations and to retain employees.
The fintech group added that the 10-year transition period for current holders of incentives should ease some concerns about the changes in the tax regime.
“The fintech industry is committed to working with all stakeholders in swiftly rebuilding our economy amidst this pandemic.”
According to the Philippines Fintech Report 2020, there are currently over 190 fintech players in the country, mostly offering services in lending, payments, digital wallets, and remittances. Bulk or over 90 percent of the digital financial transactions in the country are generated by the fintech group’s members.