Salceda: CREATE R&D incentives to boost PH innovation; clear BIR policy on deductions needed

The research and development incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, now awaiting President Rodrigo Duterte’s approval, will boost the country’s global innovation performance and regain its ranking in the Global Innovation Index (GII).

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district), who authored the measure gave this assurance in reaction to the March 3 report by the GII advisory firm, Tholons, which showed the Philippines and Manila dipped dramatically in their competitiveness as a preferred site for Business Process Outsourcing (BPO) locators.

The “Tholons Global Innovation Index 2021” (TGII) report showed that the Philippines plunged from its 5th rank in 2020 to 18th spot this year in the “Top 50 Digital Nations” category. Manila, also tumbled to 8th spot from its lofty 2nd place position in the 2020 “Top 100 Super Cities” category.

While this is not yet a “cause for alarm,” Salceda said that if left unattended to, the country’s innovation rankings may impede further growth by the BPO sector. “BPOs are still growing dramatically in the Philippines.” he noted.

Salceda said CREATE will provide an even stronger boost, particularly for innovation. Under the measure’s enhanced deductions, research and development expenses are eligible for double deductions, or another 100% from taxable income,” he pointed out.

“The Bureau of Internal Revenue (BIR), however, has to be very clear on the guidelines on what are creditable; so that there is no room for discretion or debate. If the rules are clear, the investment on R&D will also be strong and predictable. Our committee will conduct hearings to provide inputs on the CREATE implementing rules and regulations. I expect the guidelines for R&D to be very clear,” he stressed.

Under CREATE, Salceda said the highest tier of incentives will also go to “research and development resulting in demonstrably significant value-added gains, improved efficiency, higher productivity, breakthroughs in science and health, and high-paying jobs; generation of new knowledge and intellectual property registered and/or licensed in the Philippines; commercialization of patents, industrial designs, copyrights and utility models owned or co-owned by a registered business enterprises.”

“CREATE is really an innovation-centric investment scheme. That’s why I expect our innovation rankings to rebound following its implementation,” he said, adding that part of the major threats to BPOs and innovations is the skills gap between the positions needed and the labor force available.

“One problem BPOs have in the country is that our labor force can speak very good English and can be very amiable with customers, but their ability to solve complex problems still needs improvement,” said Salceda who also sits as the House economic recovery co-chair.

“We have to radically change our ‘for-compliance-only’ education system. Our learners are not taught to innovate or think clearly and profoundly. Just to show you how bad things are, some schools require their student to copy the textbook in their notebooks. And you have a curriculum that does not encourage learners to think differently and solve problems unconventionally. That’s where innovation dies,” Salceda said.