Senate moves on Create dangerous

Alocal think tank has voiced opposition to the proposed insertion of a “grandfather rule” and splitting the Corporate Recovery and Tax Incentives for Enterprises ( Create) bill into two, calling the moves contrary to the measure’s aims and “dangerous.”

In a statement on Friday, Action for Economic Reforms (AER) warned there were attempts in the Senate to weaken the reforms under the bill.

The second package of the government’s Comprehensive Tax Reform Program, Create seeks to reduce the corporate income tax (CIT) rate from the current 30 percent to 25 percent this year, and further trim it by 1 percentage point starting in 2023 to reach 20 percent in 2027.

It also seeks to rationalize incentives currently being enjoyed by select firms, especially those in economic zones.

“One amendment [that] threatens to weaken the reform is the grandfather

rule, which Sen. Ralph Recto proposed on October 15,” it said.

Recto’s proposal involves the “grandfathering” of current investments registered with the Philippine Economic Zone Authority and other investment promotion agencies.

In business or financial terms, grandfathering refers to investors or businesses that are allowed to continue operations and enjoy the perks received under old laws or rules, and be exempt from new ones that would be applied to new investors or enterprises.

“We lambast Senators Recto, [Maria Imelda Josefa “Imee”] Marcos, [Mary Grace] Poe and [Franklin]

Drilon, who have all expressed their support for this grandfather rule,” AER said.

It also believes that the rule is a “killer amendment that destroys the very purpose of the bill.”

“Retaining the tax perks of existing registered enterprises without bounds and without transitioning to be subjected to Create goes against the very purpose of rationalizing fiscal incentives, which is to address the arbitrary dispensation of fiscal incentives,” the group said.

Besides the grandfather rule, AER said another “dangerous proposal” was to split Create into two bills: one for fiscal incentive rationalization and the other for CIT reduction.

It noted that four senators — Drilon, Marcos, Richard Gordon and Francis Pangilinan — voted to split the bill on October 15.

“AER expresses its disappointment toward the senators who voted to split the bill, especially Senators Drilon and Pangilinan, who now seem to be bedfellows with Senators Gordon and Marcos,”

the think tank said.

Splitting the bill would weaken the political support for the incentive rationalization bill, it warned.

“We cannot split the Create bill, as both fiscal incentive rationalization and corporate income tax reduction must go hand in hand if we want this bill to serve both a stimulus during the economic downturn caused by the pandemic, as well an instrument to rationalize and modernize investment promotion and the fiscal incentive regime in the long term,” AER said.

“We caution the senators against supporting such amendments, which undermine the very purpose of this critical piece of legislation. We urge them to seriously reconsider voting in favor of amendments like the grandfather rule, which irresponsibly impedes the muchneeded reform of our fiscal incentive system,” it added.

AER is an independent, reformoriented and activist policy organization founded by a group of progressive scholars in 1996.