Highlights of interpellations on the CREATE bill
September 23, 2020
Sponsor: Senator Pia S. Cayetano (Chair, Senate Ways and Means Committee)
Interpellator: Senator Ralph Recto (Senate President Pro Tempore)

Part 1: On CITIRA/CREATE being revenue neutral

Senator Pia S. Cayetano: Mr. President, the Senate President Pro Tempore is right. And I thank him for starting with this easy question so we can spread into the record the reasons for the change in the bill from the CITIRA Bill to the CREATE Bill.

His honor knows that the main point here... There are two main points. The very main point here was the immediate reduction of the Corporate Income Tax from 30 to 25 percent. In the CITIRA Bill, this would've been only one percent at that time. And I do recall that his honor was actually a proponent of expediting that decrease.

Sen. Recto responds

Sen. Pia: So that's really the main change that was done here. And then, the second important change was, given the pandemic, and I know that is what triggered the changes - is the longer sunset period for the current investors that are invested in receiving incentives. Because that was another contentious issue as to how much time can we give them to adjust to the new set of incentives that we are giving.

So in a nutshell, it is the sudden decrease in the corporate income tax that will be available immediately to every corporation invested in the Philippines regardless of whether they have incentives or not. And the second is the sunset provisions that were made more liberal in favor of the investors.

And then there were more tweaks done. Even until last week, I was still accepting amendments from our colleagues. And I believe DOF has tried to be as generous as they can in accepting these changes, Mr. President. In a nutshell, that is the answer.

Part 2: On the "Grandfathering Rule"

Sen. Pia S. Cayetano: Mr. President, his honor is aware, and I think all our colleagues have heard the position of DOF on "grandfathering"? DOF has presented the feedback that they have gotten from the industries, and this representation has also had meetings with the various international chambers. And they are okay with the new incentive package under CREATE. I am just relaying to you the information that they have given to me as a body. That does not mean that there are not individual firms who are in disagreement. But I am relaying to this body, to our colleagues, that in general, the various chambers have supported CREATE.

This is given the longer sunset period. That in itself is considered a grandfathering. When we differentiate the treatment of those who have been in the country, or who have been dealing with us, by giving them a separate set of incentives, which is a longer transition, that in itself is considered grandfathering.

Of course, our Senate President Pro Tempore has been proposing actually a grandfathering rule, which means "may forever". That is really the issue that this body will have to resolve. Because according to DOF, there is no country that offers these "forever incentives". And as I said, I am just your vehicle here to try to consolidate all our best amendments, and it will be for the body to decide that. I am just relaying what has consistently been the position na wala sanang forever because there is no such thing in other countries.

And one last point that I would like to emphasize is that when DOF studied the incentives being granted in other countries that are similarly - I can't say Southeast Asian only, because depending on the product, we either compare ourselves with Vietnam, with India if it's BPOs. And so apples for apples, what we are going to be offering in CREATE is competitive.

Again, dear colleagues, I am just relaying to you the position of DOF and what is my job to relay. At the end of the day, it's up to the body to decide. Because I don't think it's accurate naman to say that we are changing [rules] in the middle of the game. A lot of companies have been able to enjoy these incentives for 20 years or more. So if we still feel that that is not enough, [inaudible]. Sa akin naman po, I am just putting forth the position of our government agencies.

Sen. Recto responds

Sen. Pia: First of all, thank you so much to his honor for all the input that he has given and I totally appreciate all the data and I totally understand his passion and desire to protect the jobs that are created in his province, as many here would. I have no issue with that. I totally understand.

All I'd like to spread into the record though is that, the idea that are we really prepared to grant a forever? Because that is what his honor is proposing.

Sen. Recto responds

Sen. Pia: What his honor is saying, we are not granting. What his honor is clarifying is that we have already granted, is that correct? Is that how you would prefer it to be phrased? We have granted a forever, let us continue to honor the forever.

Sen. Recto responds

Sen. Pia: Noted. I try my best to be very accurate so to address his honor's concern that that has been granted, then yes, I agree that has been granted. And what DOF's position is, is there is no such thing anymore happening in the world. And we have for the record investors in PEZA - 45 investors in PEZA have been receiving these incentives for 26-30 years. There's 207 and a total of 239 if I look at the other IPAs that have been receiving incentives for 21-25 years. There are 333 that have been receiving incentives for 16-20 years. So again, I simply pose this to the body, for us to determine if we want this to continue or if we are prepared to provide the sunset provision that DOF has proposed, which is from 4-9 years.

Yun lang naman yun, for me it's a very simple thing that we have to look into weighing everything.