CREATE seen to speed up economic recovery

CEBU, Philippines — The immediate passage of the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) is seen to speed up economic recovery post-pandemic.

During the “Cebu Property Market Briefing” hosted by Colliers International Philippines held yesterday, Dom Fresdrick Andaya, Colliers director for office services and tenants representation, magnified the importance of the passage of CREATE Bill to law, as this could provide a huge relief to suffering companies badly hit by the pandemic.

“The key factor towards our recovery is the passage of CREATE Bill. This will stimulate the economy,” said Andaya.

Aside from the availability of the vaccine, the Philippine law makers should also need to see the urgency of passing the bill into law as soon as possible, he reiterated.

Likewise, Cebu-based developer Charles Vincent Ong, chief operating officer (COO) at Innoland Development Corporation believes that if passed into law, the bill could help push the economy forward while businesses are navigating the new order of economic flow.

The CREATE Act seeks to provide micro, small and medium enterprises (MSMEs) with the largest stimulus package ever. It will help small and medium businesses recover from the economic crisis brought about by the COVID-19 pandemic via a hefty 10-percentage point cut in the corporate income tax (CIT).

If this bill is passed by the House of Representatives and signed by President Duterte, MSMEs will start paying only 20 percent in corporate income tax retroactive to July 1 this year from the previous 30 percent.

The proposed law classifies MSMEs as domestic corporations with total assets, excluding land, of not more than P100 million and net taxable income of P5 million and below. Businesses with net taxable income of P5 million and above, including foreign firms operating in the country, will pay 25 percent.

The Department of Finance (DOF) had described CREATE as a “legislative imperative” because it would help struggling businesses reeling from the pandemic-induced economic shock by giving them a big tax cut effective the second half of this year.

CREATE will benefit not only the business sector but also educational institutions and hospitals. CREATE reduced taxes for proprietary, non-profit educational institutions and hospitals to a 1-percent special income tax rate from July 1, 2020 to June 30, 2023.

To encourage job-generating investments, CREATE provides projects with a minimum investment capital of P50 billion or those that can generate at least 10,000 employees a special incentive package of at least 40 years.

CREATE also calls for a Strategic Investment Priority Plan (SIPP) that shall be formulated every three years. This will include priority projects or activities that have substantial amounts of investments, considerable job generation capacity, and modern technology. In short, the SIPP list should include capital-intensive, job-creating investments that we want to relocate here.

According to Andaya, while these recovery enablers are yet to get moving, “we need to temper our excitement [for recovery]. But work on what needs to be done,” adjusting to the new order of economic landscape.

“There are challenges need to be addressed. There are adjustments that need to be done,” Andaya said reiterating that while recovery is imminent, timeline of achieving it depends on a lot of factors including strong government initiatives and proactive action from the private sector.