CREATE Law pushes corporations’ earnings results higher

MANILA, Philippines — Conglomerates are reaping the benefits of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), which lowered corporate tax rates in a bid to improve the competitiveness of the Philippines as a business hub.

Passed into law in March this year, CREATE provides a wide range of provisions aimed at reducing the COVID-19 burden on both foreign and domestic companies.

The business-friendly measure lowered the corporate income tax rate to 25 percent from 30 percent. It took effect in April, but with retroactive provisions all the way back to July 1, 2020.

Some listed companies reported higher income because of the savings from this measure.

Pangilinan-led telco giant PLDT, for instance, reported P900 million in savings from the lowered income tax.

PLDT’s  first half net income rose to P15.2 billion from P13.9 billion a year ago due to lower provisions for income tax.

Metro Pacific Investments Corp. (MPIC), another Pangilinan-led conglomerate, likewise reported P600 million in savings from CREATE as of the second quarter, which helped cushion the impact of the different quarantine measures.

Its core net income for the second quarter grew to P3.5 billion, up 37 percent quarter on quarter and 82 percent from P1.9 billion a year ago.

“This acceleration of growth reflects an improvement in performance notwithstanding the continued imposition of varying levels of quarantine across the country, and was partially augmented by the impact of the CREATE Law which lowered income tax rates from 30 percent to 25 percent,” MPIC said.

Po family-led Century Pacific Food Inc. likewise reported that it benefitted from the implementation of CREATE, as well as from an income tax holiday on its new tuna plant.

Chad Manapat, CNPF’s chief financial officer, said gross margins and operating expenses as a percentage of sales were maintained, thus, EBITDA registered a growth of nine percent in the first half, tracking topline performance.

“The company also benefited from favorable tax rates due to the implementation of CREATE Law and an income tax holiday on its new tuna plant, lowering effective income tax rates to 16 percent,” Manapat said.

Thus, from a tax rate of 23.9 percent in the first half of 2020, CNPF’s tax rate declined to 16 percent in the first half of 2021 because of CREATE and the income tax holiday.

Manapat said profits would be reinvested in capacity expansion programs, sustainability initiatives and upcoming innovations.

CNPF is expanding its coconut production facility to boost the plant’s capacity by 50 percent. This is expected to go online in the third quarter of the year, generating 500 quality manufacturing jobs.

CNPF has revised its profit guidance for the full year to a growth of 20 percent from 10 to 15 percent previously.

Another company which reported benefits from CREATE is Gokongwei-led Universal Robina Corp., which had savings amounting to P58 million in the second quarter.

For the first half of 2021, URC reported net income after tax of P8.5 billion, up 42 percent versus the same period last year, due to a one-time gain from sale of idle land, as well as benefits from CREATE.

Economists from different schools, including the University of the Philippines, have opposed the passage of the bill in this time of COVID-19, saying this it would reduce government revenues and would mean subsidizing corporates.