Responses of Senate Ways and Means Chair Pia S. Cayetano to the questions of Sen. Joel Villanueva

On the CREATE bill

Sen. Joel asked about the enhanced deductions under CREATE

Sen. Pia: As I already pointed out in last week's interpellation, CREATE already recommends a 150% deduction for labor. So if registered enterprises choose the enhanced deductions, they would get 150% compared to the 100% that is allowed by regular corporations that do not have deductions.

So may I clarify that what his honor is now asking is that, even non-registered companies would be able to avail of enhanced deductions?

Sen. Joel asked if Sen. Pia would be open to expanding enhanced deductions

Sen. Pia: We have existing laws that also provide for deductions: RA 7686, which is the Dual Training System Act, it provides for a 50% additional deduction for agriculture, industrial, and business establishments that will participate in training systems; and RA 6971, the Productivity Incentive Act of 1993, which grants business enterprises manpower, training, and special studies to rank and file employees. Pursuant to a particular program, they would also be entitled to an additional 50%.

So, these already exist for companies that are not registered.

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Sen. Pia: I actually only mentioned two laws that offer enhanced labor deduction. There are more than two, including the Philippine Green Job, which is very consistent with our sustainable development goals.

I'd like to throw back the question to his honor, because when his honor says that companies have not availed, I would like to point out that the solution is not to just repeat it in another law. There are laws already governing that, that grant these incentives. I don't see how including it here would change that. So maybe we can challenge DOLE to increase their campaign for this, maybe it's also a campaign on the awareness of the various sectors that training is vital for survival in the 21st century.

But I do not see the advantage of repeating that when there are already existing laws that provide for those additional incentives, exactly what his honor is referring to.

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Sen. Pia: On the first point his honor mentioned, that they would be enticed by putting it in CREATE, if there is no difference in the offer, then I don't understand how they would be enticed.

If what his honor is proposing is an amendment of those laws that would be included in CREATE, because it would change the provisions... I can understand the logic there. Because you are changing the requirements. However, I do not know if the right place to do this is CREATE, because I am trying to be consistent with the requirement on one subject, one bill. And as it is, we have the income tax and then the incentives that are given through the FIRB, for registered corporations.

To start amending the other existing laws not to be governed by the FIRB, I am not sure if I am able to do that without violating the Constitution. So that would be my restriction, not in contradiction to his honor's proposal per se.

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Sen. Pia: Always open. Just a caveat that the amendments that obviously would be easier for me to accept would be amendments that would be aligned with the job opportunities.

Since we are trying to develop the areas of science and technology, syempre mas aligned ho doon ang ating deductions. Another point I would like to respond to, when his honor said na hindi maka-avail ang MSMEs sa incentives because they cannot comply with the capital requirement, there is no capital requirement. The MSMEs are welcome to apply. And again, maybe this can be a campaign that DOLE, SEC, DTI, should really embark on so the MSMEs know that they are welcome to register and avail of these incentives because it is misinformation when they think they cannot avail of the incentives because of the high capital requirement. Otherwise, they would no longer be an "MS" kung large na sila. And the objective really is to also include them.

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Sen. Pia: As to a specific amount of a capital, there is no specific amount, there is no amount specified.

And technology is only one of the criteria looked at to qualify for incentives. As I mentioned, we have Tier 1, 2, 3. And basically, in Tier 1, if you are addressing sustainable development goals, basic agriculture, pasok naman po yun. It's only in Tier 3 that advanced use of technology is required.

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Sen. Pia: We need to distinguish between regular companies that are allowed 100% deduction for labor. So we are only making it more enticing when the business objective is aligned with our SIPP. And whether that's technology, or agriculture, construction... Hindi naman mahirap mag-qualify talaga sa Tier 1. And they would get enhanced deduction...

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Sen. Pia: In other countries, I have actually studied apprenticeship programs in Europe. In Italy, they have a very strong apprenticeship program, so as in Germany, and definitely, I understand that that actually takes the place of further education because they are very specific with the training they receive.

And so, I am very open to that. As to how it would be applied, I don't know. I would be happy to work on this with his honor to check with the DOF and others on how this would apply... In principle, I support. I just don't know if there are limitations as far as DOF is [concerned]. Because I know, in general, their concern there is maraming nag-aabuso ng provisions na ito. So that I think is the main concern they have.

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Sen. Pia: I just wanted to respond that although the position taken by DOF is that the enhanced deduction would only apply to employees, and apprentices are not considered employees, personally, I would be open to this for so long as there is a validated apprenticeship program. I think that's very important because hindi naman pwedeng basta kahit sino lang, tinatanggap. I think that will strengthen our common advocacy on the strong linkages between the academe and the companies...

As a very quick example, I was able to facilitate such an arrangement between Taguig City's youth and IBM I think four years ago... They needed a high school program that went beyond two years. So the senior high of grades 11 and 12 was not enough. That's why it really entailed that we had close coordination because we had to start a year or two before that on this very specialized training program for the youth. It was included in the curriculum that was provided for by IBM.

So I am very interested. I just want to provide the necessary support to ensure that it is not abused...

On the MSMEs registering for incentives, I must emphasize that this is something that we will require DTI and the other agencies to really highly promote because in fact, under CREATE, the processing time for MSMEs is just 3 days, as opposed to the lengthier time for non-MSMEs.

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Sen. Pia: This is actually the reason for an FIRB under CREATE because we really need this kind of data to help us monitor and hold these companies accountable for what they do... Mamaya diyan, nagre-retrench? sila, nagva-violate sila, and I share his honor's concern for the labor sector.

The requirement for the continued registration would obviously be in compliance with the labor laws. And that is supposed to be monitored by the IPAs. But do we really know if it's being monitored? I don't believe we have information that shows us how many IPAs have "disciplined" the registered businesses for violations. I don't even know if we have that. And we should be able to compare that through the IPAs so that ma-ensure natin na, ito pala magaling, maraming citation na binigay tapos na-check niya. Wala tayong ganun as far as I know.

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Sen. Pia: I am with you on the desire to create stability for the jobs. But I also am mindful that there may be different conditions that would be in place, circumstances wherein we need to give these companies flexibility if they need to fire. That's a basic right naman of an employer, diba?

So as long as ganun naman ang tenor nun, I don't think it is correct to interfere with that basic power that they have to hire and to fire. So a general provision on retrenchment, I am not so sure how that will work. I would imagine they are availing of incentives and know what kind of technology they are putting in, so para mag-retrench sila because of redundancy or something like that in the first few years, parang hindi naman ata mangyayari yun because they know what they are bringing in.

So it may just require a little bit more communication and we are happy to do it off the floor to see what we can do to strengthen it, but limit lang naman... Because baka naman matakot din pumasok dito sa atin ang mga companies. I want to hold them by their duty to respect and uphold the rights of laborers, at the same time, not create this environment where pinagbabawalan naman natin sila... And may due process naman sila.

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Sen. Pia: Just to be clear, when you approve their application, nakalagay naman doon that they are bound to comply with labor laws of the Philippines. And we can improve on that and be very specific. Because of course, we expect them to do that, but wala akong problema na i-highlight pa lalo yan.

The kind of businesses that may enter, the number of employees are also conditions that are also looked at by the approving authority. So obviously, kung ang "come on" nila is, "We're hiring this many," then agad-agad sila nagtanggal, malabo naman yun... Kung factor talaga yan kung bakit ka binigyan, nakatali ka talaga doon.

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Sen. Pia: There could possibly be businesses coming in with small staffing, but let's say they are highly specialized in the sciences. So let's say, they only have a team of 10 scientists, and are open to tying up with UP, UST, for a few other scientists. So they may not be labor intensive, but they are directly addressing our goal in Tier 3 on research, improvement in science and technology.

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Sen. Pia: It is not always just about job generation. That's why I gave that kind of example, that it may be specific to a certain area of business, and in this case, it is science and research, na hindi labor per se ang pakay. There may be other businesses though that are focused on labor/job generation, and therefore perhaps the requirement on no retrenchment would come in there...

We have to have that degree of flexibility. So the answer would be, no they are not always. It's a major consideration because we have a labor problem still to the extent that we need jobs, but it is not the only kind of businesses that we are trying to attract.

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Sen. Pia: It should be as diverse and as detailed as we need it to be. Because we can talk about rank and file, but I would still want to know what kind of training, skills are they doing. They're still rank and file, but they may be doing different skills in different companies. Which ones are receiving a lot of training? What kind of training?

So I don't think there is any need to confine ourselves to a certain kind of monitoring... I highly encourage his honor to give them his recommendations to improve the kind of monitoring and feedback we need to attract the kind of jobs we want and create the labor force that we want.

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Sen. Pia: They will be doing that for the assessment of the application because they will have to determine kung Tier 1, 2, or 3, and the impact on the location... in that particular area.

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So definitely, they will already be considering the cost-benefit analysis. But I think the impact of this provision is to really require that the IPAs shall submit the data that will enable FIRB to do that.

The problem that DOF has encountered, and [inaudible] as well, and I think to a certain extent, they cannot get the data from the IPAs. So that is the reason for this provision. So that is the reason for that provision, but it doesn't mean that that is the only time that they will be applying that cost-benefit analysis..

Sen. Pia: His honor and I are very much aligned in requiring that these companies are accountable, especially an industry like that. But for that matter, other industries, maybe on the surface... ang wastewater pala nila hindi nati-treat...

Spread out throughout the bill are requirements for the sustainability of their enterprise. What we can explore is if there is still a further need for an amendment that would ensure that the cost-benefit analysis includes that. I've spread the accountability in terms of sustainability throughout the bill. I am happy to improve it to ensure that really happens.

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Sen. Pia: By mandating under the CREATE law that these data [cost-benefit analysis] be available, then once we have that template... it's a tool that will benefit us.

With the data, this will really empower us... I am proud of our work in including the sustainability of their ventures in there. Because not all are as visibly destructive as mining [which] consumes our natural resources. And other companies may not show that on the surface, but it can have detrimental effects also. That is why CBAs would really be required under our CREATE bill.

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Sen. Pia: If based on the technology they are using, that itself is destructive without question, I guess that would have a final effect on their application. But if it is just a minor component, it's not even the main business... I think madali naman nilang mapa-amend yun na, "No, we are already using higher level of [technology]."

But if it's the main business, then that may affect the whole application itself.

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Thank you very much, Sen. Joel Villanueva. I really appreciate your comments and concerns. I am happy that you spread it into the records. Because that will help guide the implementing agencies on our intention here in the Senate. Thank you.