Connect with us

Hi, what are you looking for?

Economy

CREATE to cost P250B in foregone revenues

Many businesses, both big and small, have been badly affected by the coronavirus pandemic. — PHILIPPINE STAR/MICHAEL VARCAS

By Beatrice M. Laforga, Reporter

THE CORPORATE Recovery and Tax Incentives for Enterprises Act (CREATE), once enacted into law, will cost the government as much as P250 billion in foregone revenues in the next two years, after the corporate income tax cut was accelerated for local small businesses.

Finance Assistant Secretary Maria Teresa S. Habitan told BusinessWorld the CREATE bill approved by the Senate will cost the government P133.2 billion in foregone revenues next year and P117.6 billion in 2022.

She said the latest estimates from the Department of Finance (DoF) assume CREATE will be signed into law by end-2020 and the provisions applied retroactively to July 2020.

“Cash flow impact is zero in 2020, adjustment to 2020 tax liabilities will be reflected in April 2021,” she said via Viber on Friday.

The DoF’s latest estimated revenue impact of the CREATE bill is 72% higher than previous estimates of P145.4 billion in combined foregone revenues in 2021 and 2022.

This is mainly due to the Senate version’s provision for an outright reduction of corporate income tax for local small businesses to 20% starting July 2020, from the current 30%. Small businesses are those with total assets less than P100 million and total net income not exceeding P5 million.

The corporate income tax for all other companies will be reduced to 25% starting July 2020, and gradually trimmed by one percentage point each year from 2023 to 2027.

Finance Secretary Carlos G. Dominguez III earlier said CREATE is one of the “largest economic stimulus measures in the country’s history” that would help businesses recover from the coronavirus pandemic.

Despite CREATE’s impact, the government still expects its overall revenues to inch up by one percent to P2.88 trillion in 2021, from the P2.85-trillion target this year.

Ms. Habitan said the slight increment was due to the expected pickup in tax collections next year coming from a low base this year.

Tax revenues fell 8.41% from a year ago to P2.372 trillion in the 10 months to October as economic activity remained sluggish. However, the country’s two biggest tax-collecting agencies, Bureau of Customs and the Bureau of Internal Revenue, have exceeded their revised monthly collection goals since July.

Under CREATE, taxpayers whose gross sales or receipts do not exceed the value-added tax-exempt threshold of P3 million and are subject to the 3% percentage tax will only pay one percent instead from July 1, 2020 to June 30, 2023. The rate will go back to two percent after three years.

The bill also reduces the preferential tax rates of proprietary and nonstock educational institutions and hospitals to one percent from 10%, from July 1, 2020 to June 30, 2023.

CREATE also aims to reform the country’s tax incentive system to make it time-bound and performance-based. It strengthened the capacity of the Fiscal Incentives Review Board (FIRB) to review and approve incentives given to the corporations.

The FIRB will assess perks provided to companies with investments worth at least P1 billion.

The House of Representatives may adopt the Senate version of the bill, according to Albay Rep. Jose M. Clemente S. Salceda, who chairs the House Ways and Means Committee. House Bill No. 4157 was approved in September 2019.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

Economy

Finding a property to settle in after years of being in the pandemic may leave home seekers and smart investors wary of whether their...

Economy

  Spotlight is BusinessWorld’s sponsored section that allows advertisers to amplify their brand and connect with BusinessWorld’s audience by enabling them to publish their...

Economy

As part of its development agenda for Pakil in Laguna, Ahunan Power Inc. (Ahunan) launched a corporate social responsibility (CSR) program dubbed “Tayo Na...

Economy

By Kyle Aristophere T. Atienza and Revin Mikhael D. Ochave, Reporters AN INVESTIGATION is underway over the “illegal” sugar importation order that was aimed...

Economy

By Diego Gabriel C. Robles THE PHILIPPINES now aims to become a high-income economy by 2045 at the latest, Socioeconomic Planning Secretary Arsenio M....

Economy

THE SY SIBLINGS remained the richest in the Philippines, despite a $4-billion drop in their net worth in 2022, according to Forbes Asia. The...

You May Also Like

Investing

Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...

Economy

Ivermectin, an existing drug against parasites including head lice, has had a checkered history when it comes to treating COVID-19. The bulk of studies...

Investing

Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered throughout...

Investing

Instagram still holds the top spot for social media in terms of building brand reputation and expanding business potential. Every day, more and more...

Disclaimer: SmartRetirementReport.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.