CLARK FREEPORT – Investors and locators here have appealed to President Ferdinand R. Marcos, Jr. to repeal the implementing rules and regulations (IRR) of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, along with two subsequent issuances of the Bureau of Internal Revenue (BIR).
This, as they banded with other investors in Subic Freeport and big business groups, including the American Chamber of Commerce (AmCham), and passed a joint resolution urging the government to suspend the implementation of new rules that have started to take away tax incentives and other fiscal perks.
In an expression of solidarity, the Clark Investors and Locators Association (CILA), AmCham, the Subic Bay Freeport Chamber of Commerce (SBFCC) are now joined by Amcham, Metro Clark Chamber of Commerce and Industry (MACCII), Tarlac Chamber of Commerce and Industry (TCCI), Metro Clark ICT Council (MCICTC), and IT and Business Process Association (IBPAP) passed a joint resolution that calls for the immediate suspension of RR-21-2021, RMC 24-2022 issued by the BIR. The resolution was belatedly released.
In a separate move, CILA sent a letter last month to Marcos, stating that the IRR and the BIR issuances “have caused substantive damage in terms of loss of the country’s competitiveness as an investment destination, lost revenues for exiting locators.”
The July 14, 2023 letter signed by CILA President Francisco Villanueva also had a copy of the resolution signed by the seven big business groups. CILA officials had clarified that the CREATE Act is acceptable as they have participated in hearings towards its passage. They however questioned the major provisions of its IRR and the BIR issuances that followed it.
CILA appealed in the letter to “direct the BIR and Department of Finance to effect policy reforms that will address the said issuances.”
“We appeal in the strongest term for the government to cure the situation by ordering the review and amendment of the IRR and the immediate suspension of RR-21-2021, RMC 24-2022 in order to preserve the original intent of the CREATE Act,” the Joint Resolution states.
The CREATE Act or RA 11534, approved into law on February 3, 2021 is meant to lower the corporate income tax rate, rationalize and streamline fiscal incentives. It stipulated a so-called sunset provision that allows registered enterprises to continue enjoying the five percent tax on Gross Income Earned (GIE) up to 2031. Payment of GIE is an incentive in lieu of all national and local taxes.
According to CILA, the IRR and said BIR issuances effectively stopped the enjoyment of the tax incentive and other fiscal perks as some investor firms are now levied with Value Added Tax and other forms of taxes.
Foreign and local investors have started to be levied more than the 5 percent GIE, an incentive they were given when they signed contracts to locate in Clark.
“The IRR and BIR revenue regulations RR-21-2021, RMC 24-2022 went beyond and against the provision of the CREATE Act insofar as the transitory provision in Section 311 of Chapter VI is concerned,” the resolution stated.
The IRR and assailed BIR issuances have also “caused massive confusion as well as substantive impairment to the cost structure, business models and the viability of existing and potential investors.”
Officials of the said business groups have lamented that business climate here and other economic zones has deteriorated and may lead the Philippines’ further lag in the share of Foreign Direct Investments in the ASEAN region. Data from the World Bank show that the Philippines only account for a mere 5% of the total average FDI for the ASEAN region for 2011-2021 while neighbors like Singapore, Indonesia, Thailand, Malaysia, and Vietnam account for 53%, 11%, 11%, 9%, and 8%, respectively.
Economic zones like Clark and Subic Freeports are magnets to FDIs where competitiveness like fiscal perks are critical to bringing in investments. CILA fears that if the issue on tax perks is not resolved, the Philippines’ ranking in Global Competitiveness survey of World Bank may further slide down (109th among 141 countries under the Burden of Government Regulation category).
The joint resolution was signed by Dr. Francisco L. Villanueva, Jr., and Christopher Magdangal, CILA President and Chairman, respectively; Amcham Executive Director Ebb Hinchliffe; MACCII President Elizabeth Carlos-Timbol; SBFCC President Benjamin E. Antonio III; MCICC Chairperson Grace Fabros-Tyler; and, IBPAP President Jack R. Madrid.
