Gordon wary of reforming incentives for investors amid COVID-19

Senator Richard Gordon on Wednesday said he is in favor of reducing the corporate income tax under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill but cautioned that rationalizing the incentives could dim prospects of attracting investors amid the COVID-19 pandemic.

"It may not be the right time to do this. Let us take a step back and look at our situation because COVID is going to exacerbate it. Let us not tinker around too much with what is working because we might end up in a bigger abyss," Gordon said in a statement.

"Why don’t we bring down corporate tax, then we go slowly but surely upon the impact on moving tax incentives?" he added.

Senate Bill 1357 or the proposed CREATE Act seeks to outrightly reduce the corporate income tax rate from 30% to 25% and gradually lower it to 20% in the succeeding years.

According to the Department of Finance, the Philippines has the highest corporate income tax rate in the ASEAN region at 30 percent since 2009. Singapore has the lowest corporate income tax in the region at 17 percent since 2010, while Brunei follows with 18.5 percent since 2015.  

While lowering the corporate income tax rate, the CREATE bill also aims to make incentives performance-based, targeted, and time-bound.

Senate Ways and Means Committee chairperson Pia Cayetano recently said "forever incentives," such as those being enjoyed by businesses inside economic zones, shall be given sunset provisions.

Gordon, however, warned that this rationalization could deter the entry of investments into the country and force those that are already here to transfer to the Philippines' neighbors in the middle of the pandemic.

"We must start putting in the incentives, putting in the attractions, putting the industrial parks that we need to do or the investments that we need to do," he said.

"Indonesia also got Japanese electronic firms. Consider the fact that Indonesia is almost eight hours away from Japan and the Philippines is three and a half hours away from Japan. Natutulog tayo sa pansitan, naiiwanan tayo," he added.

'New social contract'

Senator Risa Hontiveros, on the other hand, said the CREATE bill could also be used to safeguard the welfare and rights of Filipino workers.

The lawmaker said she will be introducing an amendment that would require firms to first secure a "seal of good housekeeping" from the Department of Labor and Employment before they can enjoy tax perks.

Only businesses and employers with "safe and pro-worker" workplaces can avail of the tax incentives under the measure, according to Hontiveros.

"CREATE is a chance at a new social contract. Hindi na puwede ang dating gawi na ang mga manggagawa ay nagtitiis sa kakarampot na sahod, kulang na benepisyo at iba pang labor injustices," she said.

The bill is still under the period of interpellations but Senate leaders are targeting to pass it before they go on break in mid-October.

The House version of the corporate tax reform bill was approved in September 2019.

Last March, President Rodrigo Duterte certified this bill as urgent. — BM, GMA News