The proposed Corporate Recovery and Tax Incentives for Enterprises Act (Create) would give the President a “superpower” granting heftier fiscal and nontax perks to businesses in order to lure them to the country, Albay Rep. Joey Salceda said.
But to make sure the President would not go overboard, three economic agencies must vet these incentives, said Salceda, who also chairs the House committee on ways and means.
“Under Create … the Fiscal Incentives Review Board (FIRB) gives the Philippines a chance to make a special counter-offer to very special offers. Basically, it’s an adaptation of the kind of discretion Vietnam had when it was able to attract the tech giant Samsung. It’s also an iteration of the kind of boutique type of investment-servicing the Singapore Economic Development Board (EDB) does,” Salceda told the Inquirer. Create is formerly known as the Corporate Income Tax and Incentives Reform Act (Citira), which was modified to make it attuned to the health crisis.
At present, the Department of Finance (DOF)-chaired FIRB only granted tax subsidies to state-run corporations.
Besides empowering the FIRB to green-light investors’ tax perks, Create will also make FIRB the oversight body for 13 investment promotion agencies (IPAs).
“If you think you’re a special kind of investment, and your size is very significant, you can approach the FIRB with your proposal for the country, and the FIRB will have the authority to recommend to the President that you be given nonfiscal incentives, in addition to the tax incentives you qualify for. The FIRB can also grant you the incentives on the menu, but for longer, if you deserve it,” Salceda said.
In other words, the country can tailor-fit the perks depending on an investors’ offer.
“What we could not accept was the proposal to be essentially as generous to everybody as we would be to an elephant-sized opportunity like Samsung [in Vietnam]. Of course, that doesn’t work. But for special opportunities, the country will now be very ready to be aggressive. We can now compete if the prize is worth it,” Salceda added.
Half of Samsung’s tablets and smartphones are now being manufactured in Vietnam for export to 128 countries, according to a Hanoi Times report. As a result of Vietnam’s special package for the tech giant, Samsung’s investment there has gone up to $17.3 billion from only $670 million in 2008.
Checks and balancesAccording to Salceda, the “superpower” to be bestowed on the President “was first proposed in Citira, in much earlier anticipation of the asylum potential and to match Vietnam.”
Salceda assured there would be checks and balances if the bill is passed.
“The most useful check against abuse of this power is that the FIRB, with the DOF, the Department of Trade and Industry, and the National Economic and Development Authority secretaries, will have to agree that an investment is worth the effort the Philippines will take. Given their varied perspectives, that will only really happen when the investor deserves it,” Salceda said.
He said nontax perks could include: regulatory relief, trade facilitation, logistics and training support, and the use of shared or common facilities similar to those in startup zones that other countries have set up.
“Other suggestions include assistance for site selection. We will see what other things we can give that are consistent with the public interest. Nothing onerous to the public, definitely,” Salceda added.
For Salceda, Create “will be an institutional reform, and a long overdue one, too—we should have the ability to mix and match [tax incentives] when appropriate.”
Last week, Salceda said that since he was supporting Create, the two chambers of Congress may no longer have to convene a bicameral conference committee to pass the bill for as long as the Senate version was “fiscally sound.”
Some senators still fear it would result in investors pulling out and workers losing their jobs once tax perks are rationalized. Some, however, have supported Create’s vision to slash the corporate income tax rate to 25 percent in July from 30 percent—Asean’s highest—at present.
The earlier version, or Citira, had provided for a gradual cut in the tax rate over a 10-year period.
It also helped that Create would not be touching in the next four to nine years the perks currently enjoyed by existing investors. This is longer than Citira’s three- to seven-year sunset period.
The Senate only has two more weeks to pass Create before Congress goes on a sine die break on June 3. INQ