VOTING 238-4-2, the House of Representatives approved on third and final reading House Bill 9794, enhancing Philippine tax incentives, also known as the CREATE MORE bill.
The bill will be sent to the Senate for action.
House Ways and Means Committee chair Joey Salceda explained that this bill is the government’s response to the changing international landscape on taxation spurred by the imposition of global minimum tax, the shift of manufacturing away from China, and the global consensus towards cost-based tax incentives.
Salceda pointed out that conflicting interpretations of the VAT regime under CREATE’s implementing rules and regulations also resulted in the loss of some 125,560 manufacturing jobs.
“Manufacturing is sensitive to increases in cost, being a low-margin operation, so any undue increase in taxes in that sector also means job losses. We need to course-correct on VAT.” Salceda said.
He added: “While the FIRB has resulted in a more complete analysis of where our tax incentives go, it also has the ability to delay the inflow of FDI by requiring multiple stages of submissions. So, we need to protect what works with FIRB – policymaking and oversight – while course-correcting on the approvals process.”
Salceda explained that the income tax holiday (ITH) and 5 percent special corporate income tax (SCIT) regime also no longer clears the standards set by the OECD for the global minimum tax.
“That means, even if multinational companies avail of our attractive incentives, they will still be made to pay a top-up tax at home. The enhanced deductions (ED) regime meets the OECD standards, but the tax rate is not attractive enough for companies to shift to that regime. By reducing the CIT rate for ED from 25 percent to 20 percent, we make it attractive for companies to shift from SCIT to ED. I reckon that over time, it will be a net positive for our fiscal space,” he said.
The lawmaker also said that high power cost is an existential threat to Philippine industries, especially in the manufacturing sector. “Because we cannot afford to subsidize power costs as our neighbors do, an enhanced deduction for power cost will be more targeted towards those who need competitive power rates to create jobs,” Salceda said. (ABS-CBN News)
