November 24, 2020
Opening Statement of Sen. Pia Cayetano
Chair, Senate Committee on Ways & Means
On the CREATE Bill Period of Amendments
24 November 2020
I would like to refresh our colleagues’ minds. We have been very busy with the budget, so may I take a few minutes to summarize where we left off so it’s clear how we will proceed.
Dear colleagues, you will recall, we already had several discussions… caucuses wherein we discussed how to proceed with CREATE. And Sen. Recto presented to us 3 possible incentives regimes, which we were given a copy of before we went on our break. And then, when we resumed, we had a few days before we tackled the budget. I manifested already that I was accepting the enhanced option number 2, which provides a balance between the need to 1. Rationalize our incentives, and 2. provide an environment to keep businesses thriving, most especially amidst this current pandemic.
So, allow me to emphasize the key features of this enhanced option number 2 that Sen. Recto presented. First, it will be noted that exporters and domestic industries are now treated differently under CREATE. The basis for this is because they have a different market, and therefore, their needs and their ability to be profitable are different.
On the income tax holiday, both exporters and domestic industries will now enjoy 4-7 years of income tax holiday. This is longer than the original proposal under CREATE. Next, exporters have the option to either avail of the special corporate income tax rate of 5 percent, which is the current rate now, which is a major give on the part of DOF. Your honors will recall that this is the sweet spot or the sweet rate that many of our colleagues wanted to retain. And as I am mentioning now, exporters will now have that option to continue availing of this special corporate income tax rate of 5 percent of GIE, or a period of 10 years, or they may avail of enhanced deductions. Meanwhile, domestic industries can avail of the enhanced deductions for a period of 10 years also. So worth noting is this 10-year period, which is quite lengthy.
The total incentive duration for both exporters and domestic industries is 17 years. That is coming from the 4-7 years of income tax holiday, and then the 10 years for the availment of the special corporate income tax rate or the enhanced deduction.
For existing registered businesses, these are the ones who are currently registered and doing business in the Philippines, those who were granted income tax holidays will be allowed to enjoy it for the period it was granted. In other words, pwede nilang tapusin yung period nila. And for those who have been enjoying the 5 percent gross income earned tax, regardless of the number of years that they have been enjoying the incentives, all will have 10 years to transition to CREATE. So that’s the sunset provision in a way. They will now have 10 years. But to clarify, they can reapply and they will be able to get the incentives that I mentioned for export or domestic businesses.
So that, dear colleagues, is the summary and I will allow Sen. Ralph at this point to make the formal proposal, basically the amendments to the CREATE Bill.