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DoF, NEDA hail Salceda role in PH historic economic reforms

The Department of Finance and the National Economic and Development Authority have hailed the “unique and decisive role” Albay Rep. Joey Sarte Salceda has played in helping the Duterte administration “make history by finally putting in place long needed reforms” in the country’s tax and fiscal incentives system.   

In a joint statement, Finance Secretary Carlos S. Dominguez and Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua expressed gratitude to Salceda for his “invaluable work to shepherd the Corporate Income Tax and Incentives Rationalization (CITIRA) Act, and now the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act” in Congress.

“The scale of this historic achievement is unprecedented, and we thank you for your unique and decisive role in this process,” said the statement which also noted that the country’s economists and policymakers are of consensus that Salceda is truly the father of CREATE.

“Your avid defense and well-studied arguments in favor of CREATE… as well as the strong support shown by the House of Representatives for this priority reform of the President, are very much appreciated,” it added.  

Salceda, House Ways and Means Committee chairman, principally authored the recently enacted CREATE Act (RA 11534), signed into law by President Duterte last March 26. The measure is seen to bring in the largest infusion of tax savings in the private sector valued at P7.1 trillion, based on a standard net present valuation, and yield 1 million to 1.4 million gainful jobs over the next decade.

“As one of the first proponents of the fiscal incentives reform in Congress, you are no doubt aware of the scale of the achievement and all the benefits it will bring to the Filipino people,” Dominguez and Chua said in their letter to Salceda, a noted economist. 

“Now that CREATE is enacted into law, we will provide enterprises with the largest economic stimulus package in the country’s history. Immediately, it will support our efforts to restore and create hundreds of thousands of jobs and keep our businesses operating,” the letter said.

“Meanwhile, the modernization of our fiscal incentives system is crucial for us to better compete for high-value investments. CREATE will help us prepare to establish a stronger investment environment when we ultimately recover from the pandemic,” it added.

The two top government executives said they look forward to working with Salceda for the passage of the remaining packages of the comprehensive tax reform and economic recovery programs that will “help secure our fiscal stability and boost the resilience of the Philippine economy against future economic shocks.”

RA 11534 cuts the Corporate Income Tax (CIT) rate from 30 percent to 20% for micro, small and medium enterprises  (MSMEs) and to 25% for other corporations with retroactive application to July 1, 2020 and includes key forms of pandemic relief, such as the lowering of Minimum Corporate Income Tax (MCIT) from 2% to 1%, effective July 1, 2021 to June 30, 2023.

It also lowers percentage tax from 3% to 1% for small businesses the gross sales or receipts of which do not exceed the VAT-exempt threshold of P3 million, effective July 1, 2021 to June 30, 2023.

Before it was called CREATE, it was dubbed as TRAIN (Tax Reform for Acceleration and Inclusion) Package 2, then TRABAHO (Tax Reform for Attracting Better and High-Quality Opportunities) bill, and CITIRA (Corporate Income Tax and Rationalization Act), pushed by Salceda who crafted the crafted the original TRAIN 1.

Salceda said he was a neophyte Congressman in 1998 when he filed the Subsidy Council Act, the ancestor of the CREATE tax reform measure. “Though it has evolved over time, the principles of a performance-based, targeted, time-bound, and transparent tax incentive system has always been my advocacy,” he added, describing the bill’s enactment as a “historic leap forward” for the country’s fiscal incentives.

Proprietary educational institutions and hospitals which are non-profit will pay CIT rate of 1% only instead of the current 10%, from July 1, 2021 to June 30, 2023. Salceda said “this will help schools and hospitals which are crucial to the country’s post-Covid-19 recovery.” He noted that Duterte has also retained the pro-countryside preference of the Congress’ version of  CREATE.

“Under CREATE, places like Bicol will receive the longest and biggest tax incentives, of up to 17 year s for new locators, and a 3-year income tax holiday bonus for firms relocating from NCR to these areas. It will also grant a 2-year ITH (income tax holiday) bonus to areas recovering from calamities. This brings the maximum length of incentives for less-developed, disaster-recovering areas to 22 years, among the most generous in Asia,” he pointed out.

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