Proposed amendments to the Corporate Recovery and Tax Incentives for Enterprises, or the CREATE Law now pending at the House of Representatives but certified as urgent by President Ferdinand Marcos Jr., should foster more investments and enhance the country’s competitiveness, Colliers Research said Thursday.
The CREATE Act helped push foreign direct investments in the Philippines to its peak of USD10.5 billion in 2021 despite the COVID-19 pandemic. The gain, however, was undermined in succeeding years due to extraneous factors such as the global economic downturn and the interest rate hikes by the U.S. Federal Reserve.
The amendatory bill, called CREATE to Maximize Opportunities for Reinvigorating the Economy or CREATE MORE, aims to:
– further lower corporate income tax to a uniform 20 percent.
– allow domestic market-focused companies and exporters, even those within the eco zones, to continue enjoying duty exemption, VAT exemption on imports, and VAT zero-rating on local purchases.
– empower the president to grant either “mix-and-match” incentives or financial support package for highly desirable projects and activities that create high value jobs, build new industries to diversify economic activities, and attract significant domestic and foreign investment.
– allow a more flexible working arrangement for export enterprises within special eco zones and free ports engaged in the information technology-business process management sector while still maintaining their tax perks.
“This new regulatory amendments will sustain the country’s competitiveness in an ever-changing global landscape,” senior market analyst Kath Taburada and market analyst Lira Moncada said in Colliers Research’s latest issue of Meaningful Insights.
Colliers’ market analysts said streamlining the tax incentives system and making it more responsive to the global market will allow the Philippines to attract more foreign investments. “This also means more jobs for qualified labor through the entry of established foreign enterprises and growth in export-oriented industries,” they added.
Taburada and Moncada said CREATE MORE’s clarification of tax incentives for IT-BPM and allowing flexible working arrangements, such as work-from-home, will be key in sustaining competitiveness of the sector.
They said that while these flexible working arrangements would affect demand for office space, it will be a “short-term trade off” since the expected increase in investments would eventually spur demand.
