July 12th, 2021
Salceda: CREATE to be principal agent of economic recovery; House tax chair says timely issuance of Strategic Investment Priorities Plan crucial in enticing new industries, creating new jobs
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says that “the most readily available tool for economic recovery” is the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, enacted as Republic Act No. 11534 on March 26 this year. The House tax panel chief called on the Board of Investments to ensure “the timely release of the Strategic Investment Priorities Plan which will be our bible for industrial planning over the next few years.”
“The implementing rules have been released. The urgent release of the SIPP is also crucial, because investors need something to refer to as they decide whether prospective internal rates of return justify investing in the Philippines. The SIPP tiering, in particular, decides how much incentives they get. So I hope the BOI can release this soon, even a partial “no-brainer” SIPP for now, while we tackle the nuances of the other more complicated sectors,” Salceda said.
Salceda pointed out that CREATE is “the largest tax stimulus for businesses in the country’s history.” CREATE reduces the CIT to 25% for large corporations, and 20% for small and medium corporations (with net taxable income of up to P5 million, and total assets of up to P100 million).
“The size of it, especially in the medium term, is hard to overstate. In net present value terms, CREATE grants businesses P7.2 trillion in financial resources to fund expansion and job creation. No fiscal reform package has come close to freeing up that much resources for business expansion,” Salceda said.
CREATE crucial for countryside development
Salceda also pointed out that the tax incentives regime under CREATE is generous and partial to countryside development, increased value-added, and research and development.
“Everyone gets 4-7 years of income tax holidays as part of the basic package, the longest being for those who locate to the countryside and those higher up the industry tiers. If you are an exporter, you get 10 years more of a 5% tax on gross income, or enhanced deductions. It’s 5 more years of enhanced deductions for domestic enterprises,” Salceda said.
“If you relocate from Metro Manila, you get 3 more years of ITH. If you are in an area recovering from calamity, you get 2 more years of ITH,” Salceda added.
“The countryside development aspect, the higher incentives for moving away from the highly urbanized centers, is crucial. The demand for real estate on the first half of 2021 is already 75% of demand from 2020. So expect the price of maintaining office space in Mega Manila will be up this year and in succeeding years. The tax differential combined with the cost differential of moving to less costly provinces will really make a difference,” Salceda said.
“It will help develop the countryside more, while also relieving some of the cost-push pressures off of Metro Manila,” Salceda added.
“I predicted that CREATE will help open the floodgates to investment, and there are signs that it has delivered. Before we enacted CREATE, on Q1 of 2021, office space demand among the BPO sector was just 35,000 square meters. Now it is up to 92,000, higher than it has been in 2020, even before the lockdowns. That is also an eye-popping 162% growth in the industry’s office space needs,” Salceda cited.
“Of course, more office space needs also means more direct jobs. It also means more indirect jobs, through janitorial services, property sector jobs, transport, service provider jobs, among others. The BPO industry, or at least certain segments of it, will qualify for the highest incentives under CREATE, once the SIPP is released. So I implore BOI to do it soon, and watch the BPO sector and other industries grow substantially,” Salceda said.
“We need a booster to prevent anemic post-pandemic growth. CREATE is the best tool for this, so we need to maximize its benefits by fully carrying it out early, and selling it to the world aggressively,” Salceda also said.