By John Victor D. Ordoñez, Reporter
THE Philippine Senate should ensure that a bill that seeks to lower the income tax on both local and foreign companies would also cut the costs of micro, small and medium enterprises (MSMEs) to boost jobs and productivity, according to economists.
“Implementing fiscal and tax incentives is critical in the current economic context to stimulate investment, drive economic growth and create jobs,” Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said in a Viber message.
“These incentives can significantly impact MSMEs by reducing their operational costs and improving their financial stability.”
MSMEs account for more than 99% of businesses in the Philippines.
Senators are in the period of amendments for Senate Bill No. 2762 or the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) bill, which seeks to lower taxes on domestic and foreign companies to 20% from 25%.
The House of Representatives passed its version of the bill on final reading in March.
It also removes the value-added tax on goods and services to essential services such as janitorial, security, financial consultancy, marketing and human resources.
Under the priority bill, registered business enterprises will be entitled to a 100% additional deduction on power expenses in a taxable year, up from 50% under the Tax Code, to address high power costs.
“By reducing the tax burden on businesses, the bill could incentivize increased investment, job creation and higher productivity,” Robert Dan J. Roces, chief economist at Security Bank Corp., said in a Viber message.
“To ensure that these benefits — economic growth, increased government revenues, better living standards — are realized, the bill may be designed with careful consideration of efficiency and additional targeted support for MSMEs.”
The measure also allows local companies to implement a work-from-home setup for up to half of their workforce to cut costs.
It also allows the President to give fiscal and nonfiscal incentives to enterprises without the need for a recommendation from the Fiscal Incentives Review Board.
Senator Sherwin T. Gatchalian, who sponsored the bill, said Congress should clarify the tax incentives under the original CREATE law passed during the previous government.
“It is not merely an update of policies; it is about creating a more dynamic future that is more responsive, more supportive and more capable of fostering growth and innovation in the Filipino people,” he told the Senate floor in his sponsorship speech earlier this month.
But Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said Congress should abandon CREATE MORE and focus on fostering innovation in local industries.
“Creating an environment of learning by doing and producing more for the same inputs would be a better option,” he said in a Facebook Messenger chat.
“It is obvious that the fiscal and tax policies are not enough to push structural transformation,” he added.
