The House of Representatives on Wednesday ratified the bicameral conference committee’s report on the proposed Corporate Recovery and Tax Incentives Act (CREATE). The Chamber approved the final version of the CREATE Act, which aims to reduce corporate income tax from 30 to 25 percent for large companies and from 20 percent for small and medium-sized companies. Spokesman Lord Allan Velasco said Wednesday that ratification of the measure would put the Philippines in a better position to attract fresh money and make our economy more attractive as an investment destination. “This recent reform of our financial regime lowers corporate taxes and provides incentives for businesses. It offers our investors – big or small – urgently needed relief who are badly affected by the ongoing global health crisis. An important feature of this reform measure is the exemption from VAT and other tariffs, including the import of COVID-19 vaccines, personal protective equipment or PPE, as well as drugs for treatment and clinical testing, ”Velasco said in a statement. The Philippines has the highest corporate tax rates in Southeast Asia. With CREATE, we can expect our country to be just as competitive as our neighbors, said the spokesman. “With CREATE’s approval and efforts to amend the restrictive economic provisions of the 1987 Constitution, we are confident that we can accelerate our economic recovery, attract more local and foreign investors, and create jobs for the Filipino people,” said Velasco . “We thank our colleagues in both Houses of Congress for ratifying this measure and for responding to the call of the time,” he added. Joey Salceda, chairman of House Ways and Means, said the bill was “the largest economic reform of the post-Edsa years”, second only to economic amendments to the constitution. “Removing uncertainty will be like opening the floodgates to investment. I expect at least PHP 12 trillion in combined domestic and overseas investments in the next decade based on CREATE alone. Of that $ 90 billion will be foreign direct investment, ”Salceda said. “This will also lead to around 1.8 million jobs in the next 10 years. Combined with economic amendments to the Constitution to maximize impact, we can create around 8.4 million jobs, ”he added. Salceda said it was also crucial to set the incentive system to make it more performance-based. “The current investment priority plan covers around 70 percent of GDP (gross domestic product). I am ready to provide incentives, but they need to be linked to economic outcomes. Better jobs for our people. Higher salaries. More training. More research and development. Stronger business. More competitiveness, ”said Salceda. The bill provides incentives for exporters and “critical” domestic businesses up to 17 years of age, with four to seven years of income tax vacation and ten years of special corporate income tax. The critical sectors are determined by the National Economic and Development Authority. Incentives for up to 12 years are also proposed, of which four to seven years for ITH and five years for SCIT for companies with an investment capital of at least PHP 500 million and otherwise five years for increased deductions. Salceda said that while CREATE would result in tax savings of around 931 billion pesetas for businesses, it would help relieve the front load and fill the economic void created by the coronavirus pandemic. He noted that the final bicameral version was able to save pesetas 282 billion from the original loss of revenue under the Senate version. “We are now preoccupied with front-loading facilities as it is now that facilities are required,” Salceda said. Adding competitiveness was a key problem CREATE wanted to solve. “With CREATE, we’re also lowering corporate tax to bring it closer to the Asean region average. Asean was the fastest growing economic region in the world. Our neighbors are our friends, but they are also our competitors. We have to try to keep up with them, ”said Salceda. He said the bill offers several tax breaks for businesses of all sizes, especially small and medium-sized ones. “With the rapid adoption of vaccines, there is a greater chance that companies will use tax savings to create new jobs. That is why we also put COVID-19 measures in place in this bill, including VAT and duty-free imports of vaccines, ”Salceda said.
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