‘CREATE’ BILL TO COST GOVT P249B IN REVENUE
THE proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) bill is projected to reduce government’s coffers by a total of P249.402 billion between this year and the time President Duterte steps down from office, budget documents showed.
Should the Department of Finance (Dof)-backed bill be legislated and implemented by the second half of this year, the government is seen to lose P44.572 billion in revenues by yearend due to the immediate 5-percent reduction in corporate income tax (CIT) rate.
In the next two succeeding years, the DOF projects state revenue losses of P97.219 billion in 2021 and P107.611 billion in 2022.
Given the expected revenue loss from CREATE, among other measures under the Comprehensive Tax Reform Program (CTRP),
total incremental revenues are expected to go down by 80.95 percent to P25.657 billion this year from P134.685 billion in 2019.
Finance Undersecretary Maria Teresa Habitan also attributed the decline in the expected incremental revenues this year to the projected economic contraction this year.
“Partly that [is because of the revenue losses from CREATE], partly because of decline in GDP growth in 2020. Tax base is also reduced,” Habitan said in a message to the Businessmirror.
For 2021, total incremental revenues from CTRP are expected to recover and more than double to P62.734 billion. This is expected to increase further by 31.78 percent to P82.67 billion.
The Department of Finance earlier said they project a P667billion revenue loss between 2020 and 2027.
Of which, the state’s total revenue losses could reach P625 billion between 2021 and 2025 and P42 billion in the second semester of the year.
The estimate, however, still does not include specific projections for 2026 and 2027, when the CIT rate is expected to further decrease.
After the reduction in CIT this year, the tax will be reduced by one percentage point annually between 2023 and 2027.
With this, the CIT will reach 24 percent in 2023 followed by 23 percent in 2024; 22 percent in 2025; 21 percent in 2026; and 20 percent in 2027.
Other key features of the bill include the extended applicability of net operating loss carry-over for losses incurred during the current year, more flexible tax incentives, and a longer sunset period for companies currently receiving tax incentives.
To recall, the earlier version of the CREATE, or Corporate Income Tax and Incentives Reform Act (Citira), was passed by the House of Representatives in September 2019, but was pending in the Senate when the Covid-19 outbreak began and forced a recalibration of its key features.
To fast-track its approval, House Ways and Means Committee chairman Joey Salceda earlier said the lower chamber is willing to adopt the Senate version of the bill as long as it is fiscally sound.
The Citira bill was also certified as urgent by President Duterte in March. However, critics have said the passage of the bill will not help the country in the middle of the pandemic, as they argued that it will not entice foreign investments while the global economy is in a downturn.