Gov’t Reduces Taxes to Encourage More Businesses

By Mortz C. Ortigoza

The government has reduced hundreds of billions of pesos of taxes to cushion the impact of the pandemic at the same time encourage more businesses and draw foreign investors, a top executive of the Bureau of Internal Revenue said.

Assistant Revenue District Office No. 4 Chief Aldrin Camba cited theCorporate Recovery and Tax Incentives for Enterprises Act (CREATE) that was passed by Congress and signed into law by President Rodrigo R. Duterte last year.

“Yes, to encourage the investors and then iyong pinag-uusapan natin na Percentage Tax iyong Non-Vat from 3%, ngayon is 1% na,” he explained about the government's strategy to attract more investors in the country and the reduction of the non Value Added Tax (VAT)Percentage Tax from three percent to one percent payable in quarterly basis.

Strategy how to attract investors that could generate more employments in the country.

The purpose of CREATE is to grant tax relief for companies in financial need, provide transparent tax provisions, and further increase their competitiveness in the Philippines to attract for example foreign investment through corporate income tax (CIT) reductions.

From July 2020 to 2022, foreign companies will be eligible for a reduction in the CIT rate to 25 percent compared to the regular rate of 30 percent — the highest in the Association of Southeast Asean Nations (ASEAN). CREATE Act opts too for a five-percentage point reduction. Domestic micro, small, and medium-sized companies will directly benefit from a preferential rate of 20 percent (businesses with taxable income of up to P5 million (US$103,318) and not exceeding P100 million (US$2,066,437).

From 2022 to 2027, the 25 percent CIT will steadily decline by one percent per year, to finally reach 20 percent in 2027 for foreign companies.

Since the fourteen towns and two cities’ Revenue District Office have more corporations as taxpayers, Camba is confident that his office leads by Revenue District Office No. 4 Chief Ernesto Mangabat can find other sources to replace the loss of revenues due to CREATE.

“Yes in some sort. We’re finding a way na saan makukuha ng ibang koneksiyon na magbangga doon sa nawala (taxes),” he stressed.

The expected reduction in government revenues because of these reductions of taxes to corporations have been estimated at P476 billion. The economic managers of the government hoped they can be offset by the CREATE Act’s fostering of a more friendly business competitive environment for the near- to medium-term.

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