Finance Secretary Benjamin E. Diokno has expressed the Department of Finance’s (DOF) support for the proposed amendments to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, underscoring its importance in fully realizing the Philippines’ potential as a global investment hub.
“The proposed amendments to the CREATE Act will enhance the incentives, clarify the rules and policies on the grant and administration of incentives to qualified enterprises, and address issues affecting the country’s investment climate,” Secretary Diokno said.
The major areas of reform, as included in the CREATE to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) bill, cover the establishment of a streamlined tax refund system for registered business enterprises (RBEs) and institutionalization of risk-based classification of claims and audit framework. This is to improve the timeliness, efficiency, and predictability of the VAT refund process.
To improve the country’s presence and market share in the foreign market, the CREATE MORE bill expands the enhanced deduction regime. This increases the deduction for power expenses from 150 percent to 200 percent, and 200 percent deduction on expenses relating to approved trade fairs, exhibitions, and missions.
Moreover, the bill proposes to clarify the transitory provision by expressly exempting transitory RBEs under the 5% gross income earned (GIE) regime from all national and local taxes, including VAT and duty incentives.
The CREATE Act establishes a performance-based, time-bound, targeted, and transparent tax incentives regime in the country. Pursuant to the law, the Cabinet-level Fiscal Incentives Review Board (FIRB) is mandated to oversee the grant and administration of incentives of investment promotion agencies (IPAs).
As of August 2023, the FIRB has approved a total of 45 big-ticket tax incentive applications from various Registered Business Enterprises (RBEs), with a total investment capital of P721.29 billion.
The approved investment projects are expected to create 31,421 job opportunities, primarily in capital-intensive industries such as information and telecommunications infrastructure, transportation, manufacturing, and real estate projects.
Additionally, as of July 2023, the various IPAs have approved a total of 752 projects, with an investment capital of P175.67 billion and 49,170 committed jobs.
In total, 797 projects have already been approved under the CREATE Act, resulting in a total investment capital of P896.95 billion and 80,591 committed jobs for the Filipinos.
These committed jobs offer long-term job security and career growth prospects, as opposed to seasonal or contractual work, which generally lacks security of tenure and offers limited opportunities for career advancement.
With regard to actual performance, six FIRB-approved projects have achieved a remarkable 96.88 percent employment commitment rate, with a total of 683 employees. This high accomplishment rate underscores the readiness and employability of the country’s workforce.
Meanwhile, in terms of investment capital, five FIRB-approved projects have reported actual figures, amounting to P24.76 billion. This represents 67.14 percent of the P36.88 billion committed investments for the five projects.
The FIRB implements an evaluation and impact analysis system before granting such incentives to RBEs to ensure that the fiscal support that the government grants to private enterprises leads to greater benefits to the people and the economy by new employment generation, innovation, capital infusion, and adoption of advanced technology.