DOF urges Congress to pass CREATE ahead of tax season

MANILA, Philippines — The Department of Finance (DOF) has called on Congress to immediately pass the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill before the end of the month to give taxpayers ample time to adjust before the next tax season.

In a statement, Finance Secretary Carlos Dominguez said economic managers are pushing for the early congressional approval of CREATE and other legislative measures to reinvigorate the economy and provide businesses with the stimulus they need to bounce back from the impact of the coronavirus pandemic.

“We hope that the Congress can pass CREATE before the end of January as this measure is crucial for businesses to continue operating, retain their employees, and create more jobs,” Dominguez said.  “This also provides taxpayers ample time to comply with adjustments to their returns due to the lowering of income taxes effective July 2020 before the tax filing season ends in April 2021.”

A bicameral conference committee is expected to harmonize the conflicting provisions of the Senate’s and House of Representatives’ versions of CREATE bill when the 18th Congress resumes session on Jan. 18.

Under the Senate version passed in November, domestic corporations with total assets of not more than P100 million, excluding land, and a net taxable income of P5 million and below, will enjoy an outright 10-percent reduction in their income tax to 20 percent from 30 percent.

All other corporations will get an immediate five-percentage-point income tax cut to 25 percent from 30 percent.

In the House of Representatives’ bill, CREATE proposes a uniform reduction of five percentage points.

According to Dominguez, foregone revenues from CREATE are expected to reach P133.2 billion in 2021 and P117.6 billion in 2022 if implemented retroactively in July 2020, for a total of P250.8 billion in the next two years.

Dominguez said these tax breaks would provide financial relief to local businesses, enabling them to bounce back from the impact of the coronavirus pandemic, retain their employees, and create more jobs.

“CREATE is really about trusting the private sector. Instead of passing funds through what tend to be less efficient government programs, this will leave the money in the private sector’s hands to revitalize their businesses,” Dominguez said.

Meanwhile, Dominguez said the Financial Institutions Strategic Transfer (FIST) is now just awaiting the signature of President Duterte after being ratified by Congress last month.

Citing assumptions provided by the Bangko Sentral ng Pilipinas (BSP), the DOF said the implementation of the Financial Institutions Strategic Transfer (FIST) Act may also result in P2.9 billion to P11.6 billion in foregone revenues.

The FIST bill would allow banks to dispose of their non-performing loans and assets through would-be asset management companies so they could extend more credit to coronavirus-hit businesses in need of assistance.

The finance chief also called on Congress to immediately pass the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bill.

This bill seeks to enable government financial institutions to form a special holding company that will infuse equity into strategically important companies facing insolvency.