MANILA — President Rodrigo Duterte has signed a bill that will reduce the corporate income tax rate in a bid to attract more foreign investments and help the Philippine economy recover from the coronavirus pandemic.
In signing the measure a day before the bill was to lapse into law, the President said he vetoed some of its portions on real property VAT exemptions.
Duterte, in a message to Congress leaders, said he signed the Corporate Recovery and Tax Incentives for Enterprises or CREATE bill that would lower the corporate income tax rate from 30 percent to 25 percent for big firms and 20 percent for small enterprises by 2029. The current rate is the highest in Southeast Asia.
"The CREATE Act will be the guiding document for much of Philippines businesses and industries over the next decades," Duterte said in a 9-page message to Senate President Vicente Sotto III and House Speaker Lord Allan Velasco.
"With over P600 billion in tax relief for job creation in the next five years, we lay our faith and invest in Filipino businesses for them to reinvigorate the economy, create more quality jobs, and generate more revenues for the government to tide us along in these trying times," said the President.
However, Duterte said he vetoed some portions of the law, including an increase in the value added tax-exempt threshold on real property sales.
The President said under the Tax Code, the sale of house and lot and other dwellings valued at not more than P2.5 million is exempt.
But the proposed CREATE amendment raising this figure to P4.2 million would "benefit those who can actually afford proper housing," said Duterte.
"If not vetoed, the estimated revenue loss from the foregoing is P155.3 billion from 2020 to 2023, which could be used in public goods to benefit the poor directly," he said.
MORE VETOED PROVISIONS
Duterte said he was also "constrained" to veto the 90-day period for processing of general tax refunds because this is "administratively impracticable."
The Chief Executive said he vetoed an item that would have excluded land and operating expenses from the measure of an investment.
He also vetoed redundant incentives for domestic enterprises.
The Chief Executive also blocked the existing registered activities to apply for new incentives for the same activity. He said registered businesses interested in further enjoying incentives "must engage in new activities or projects incentivized in the Strategic Investment Priority Plan."
Duterte rejected a would-be limit on the power of the Fiscal Incentives Review Board over projects or activities with an investment capital of above P1 billion.
He also vetoed provisions that would allow a future President to exempt an investment promotion agency from coverage of the CREATE Act.
This "disregards the huge steps we have taken to rationalize our fiscal incentives system," he said.
Lastly, Duterte also rejected the automatic approval of applications for incentives he said "runs counter" to the policy of accepting or junking these "based on merit."
"Crucial portions of the CREATE Act were intended to be emergency tax relief for struggling enterprises, but we must not lose sight of this reform's long-term objectives," the President said.
"As fiscal resources will be much needed for the government's economic recovery efforts, we must keep this reform's provisions reasonable and not redundant."
CREATE, Corporate Recovery and Tax Incentives for Enterprises bill, Department of Finance, DOF, Pia Cayetano, Migz Zubiri, Ralph Recto