Former secretaries of finance and socioeconomic planning chiefs, along with state bankers, eminent economists, and industrialists have sought the immediate congressional passage of the long-due second package of the Comprehensive Tax Reform Program as they chided critics for “rehashing old arguments and delaying what we know to be a necessary boost” for an early recovery of the coronavirus-stalled economy.
In a statement, an initial list of 17 signatories expressed their full “support for the immediate passage of the Corporate Recovery and Tax Incentives for Enterprises Act, formerly known as the Corporate Income Tax and Incentives Rationalization Act, as a much-needed boost to the recovery of the Philippine economy, and as a necessary policy tool for retaining and creating jobs that will help our people secure their livelihoods against the adverse impacts of Covid-19”.
The signatories cited the need for an immediate 5-percent cut in the corporate income tax, which would benefit all businesses, especially micro, small and medium enterprises, and the extension of the net operating loss carryover by two years to “provide businesses more resources to pay for their expenses and keep their employees” amid the Covid-19 pandemic’s economic fallout.
Signatories to this joint statement include former Bangko Sentral governor Amando Tetangco Jr.; former Finance secretaries Roberto de Ocampo, Margarito Teves, Jose Camacho, and Jose Pardo; former Prime Minister Cesar Virata; Monetary Board member and former Socioeconomic Planning secretary Felipe Medalla; former Socioeconomic Planning secretary and Ateneo professor Cielito Habito; MB member Bruce Tolentino; former Finance undersecretary and Foundation for Economic Freedom vice chairman Romeo Bernardo, former UP Los Baños vice chancellor and current Asian Development Bank Institute board member Fermin Adriano; Dean Joel Tan-Torres and tax and incentives policy experts professor emeritus Epictetus Patalinghug of the University of the Philippines Virata School of Business and professor Renato Reside of UP School of Economics, UPSE Alumni Association president Jeffrey Ng, former Philippine Institute of Development Studies president Gilberto Llanto, and Action for Economic Reforms coordinator Filomeno Sta. Ana III.
“The immediate five percent cut in the corporate income tax strikes a good balance between the fiscal needs of our country and the need to support businesses. The reduction in the tax rate will provide businesses more resources to pay for their expenses and keep their employees. The rate reduction could be conditional on job retention or creation. The immediate cut sends a strong, clear signal to both the local and international business community that the Philippines is serious about competing for investments,” the statement said.
The NOLCO benefit, meanwhile, “together with the credit stimulus strategies of the government, will help keep businesses afloat and help protect the employment of hundreds of thousands of Filipino workers,” they said.
The signatories also cited their support for CREATE’s provision empowering the President, upon the recommendation of the Fiscal Incentives Review Board, to grant longer incentives or additional non-fiscal incentives to investments that have a massive positive impact on the economy.
This provision, they said, “repositions the country to compete for investments”.
This joint statement has come on the heels of another statement of support for CREATE from 33 of the largest business and professional organizations in the country, who have called on Congress to act “quickly and decisively” in restoring market confidence and providing the “most direct, cost-efficient and instant relief” to enterprises suffering from the coronavirus pandemic’s economic fallout.
The following groups last week called for passage of the measure before Congress’ sine die adjournment: Alyansa Agrikultura, Anvil Business Club, Bankers Association of the Philippines, Cebu Business Club, Cebu Leads Foundation, Chinese Filipino Business Club, Inc., Entrepreneurs’ Organization Philippines, Federation of Filipino-Chinese Chambers of Commerce & Industry, Inc., Federation of Indian Chambers of Commerce (Philippines) Inc., Financial Executives Institute of the Philippines, Foundation for Economic Freedom, Institute for Solidarity in Asia, Inc., Institute of Corporate Directors, Investment House Association of the Philippines, Management Association of the Philippines, National Real Estate Association, Organization of Socialized Housing Developers of the Philippines, People Management Association of the Philippines, Philippine Center for Entrepreneurship (GO NEGOSYO), Philippine Chamber of Commerce and Industry, Philippine Council of Associations and Association Executives, Philippine Franchise Association, Philippine Hotel Owners Association Inc., Philippine Institute of Certified Public Accountants, Philippine Retailers Association, Philippine Women’s Economic Network, Procurement and Supply Institute of Asia, Rural Bankers Association of the Philippines, Shareholders’ Association of the Philippines, Subsidivision and Housing Developers Association, Tax Management Association of the Philippines, UPSEAA, and Women’s Business Council Philippines.
In their statement, the group of former finance and socioeconomic planning secretaries and industry leaders pointed out:“Even sectors that had made known their reservations in the past have signified qualified support for its urgent enactment.”
The signatories also warned of the consequences of delaying the passage of the reform, saying that “during crisis periods, inaction on crucial reforms leads to even greater cost to society”.
“The shift in industry sentiment toward CREATE demonstrates what the undersigned have always asserted: that any delay in passing the reform causes undue business uncertainty, and costs the Filipino people inordinate amounts of foregone opportunities for better jobs and better business prospects,” the statement added.
Emphasizing the case for reform, the signatories also said that “the current incentives system has not worked to the full benefit of the Filipino people. It has not incentivized value-adding behavior, and it has cost the Filipino taxpayer, over several decades, trillions of pesos that could have been better spent on delivering public goods, such as infrastructure, and an enhanced incentive system that is performance-based, targeted, time-bound, and transparent. The status quo is far from what the Filipino people deserve”.
“What we do in the coming weeks will be recorded in historical accounts of this challenging period and what will follow. Let it not be said by future generations that we spent the most crucial days rehashing old arguments and delaying what we know to be necessary. Responding to this crisis effectively and efficiently includes passing CREATE into law on behalf of the Filipino people.” the statement concluded.
The statement is the latest in a series of statements of support from business leaders, student leaders, and civil society organizations for the urgent passage of CREATE, which has been calibrated to reflect emerging business needs brought about by the global health emergency triggered by Covid-19 .
The reform is championed in the Senate by Sen. Pia Cayetano, a UPSE alumna, and in the House of Representatives by Rep. Joey Salceda, an economist and former equities analyst.
President Duterte has certified the bill as urgent, and the Senate leadership has committed, in statements made to the media, to speed up deliberations on this measure.
The President’s economic team has appealed to lawmakers to pass CREATE before the sine die adjournment of the Congress to allow businesses to benefit from the immediate cut in the CIT rate from 30 percent–the highest in the region–to 25 percent as early as July this year.