Investor-firms inside Clark and Subic freeports and big business groups, including the American Chamber of Commerce (Amcham), have unanimously passed a 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), 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 Bureau of Internal Revenue (BIR).
The business groups also urges government to conduct a review on the Implementing Rules and Regulations (IRR) of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act or Republic Act 11534.
“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, approved into law on February 3, 2021 is meant to lower the corporate income tax rate, rationalize and streamline fiscal incentives. It stipulated 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.
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.
“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.