SENATOR PIA S. CAYETANO
CHAIR OF THE SENATE WAYS & MEANS COMMITTEE
Sponsorship speech on the Bicameral Conference Committee Report on the CREATE Bill
3 February 2021

Mr. President, as Chairperson of the Senate contingent to the Bicameral Conference Committee tasked to propose reforms on the Corporate Income Tax and Incentives system, I am elated, I am giddy with excitement to report to the Senate on the approved version of the CREATE Bill. Here are the major provisions of our measure, which the bicam committee adopted:

- Importation of Covid-19 vaccines are exempt from import duties. Note that the Senate version already included exemption of the vaccines from VAT.

- Enterprises have the option to choose between the Special Corporate Income Tax of 5% or Enhanced Deductions after enjoying the Income Tax Holiday (ITH)

- Higher incentives for enterprises located outside of metropolitan areas

- Additional incentives for enterprises that fully relocate outside of NCR

- Additional incentives for those who will locate in areas that are recovering from disasters or armed conflict.

Meanwhile, here are the key provisions in the Senate version that we retained in the bicam version:

Immediate reduction of the corporate income tax to 20% for domestic corporations with total assets not exceeding P100 Million (excluding land) and total net taxable income not exceeding P5 Million

25% for all other corporations

1% Minimum Corporate Income Tax (MCIT) effective July 1, 2020 until June 30, 2023

1% tax rate for Proprietary Educational Institutions and Hospitals which are Non-Profit effective July 1, 2020 until June 30, 2023

VAT exemption threshold for socialized and low-cost housing to Php 2.5M and Php 4.2M for house and lot.

VAT exemption for medicines for cancer, mental illness, tuberculosis, and kidney diseases beginning January 1, 2021

VAT free importation and sale of COVID-19 medicines, PPEs beginning January 1, 2021 to December 31, 2023

As to the Joint Explanation on the disagreeing provisions of House Bill No. 4157 and Senate Bill No. 1357, I would like to request that this be inserted into the record.

Mr. President, we have been wading through the murky waters of this pandemic for almost 11 months now. Every little bit of good news we savor, we relish - the increased access to PCR machines, the increased capacity of our health system, the development of COVID-19 vaccines, and various relief measures we included in Bayanihan 1 and 2.

But today Mr. President, we ratify this unprecedented measure that will serve as our roadmap to a more sustainable future, as well as our fulfillment of the overdue reforms in the country's tax and fiscal incentives system.

Some 25 years ago, the first bill was filed on the rationalizing of incentives. A quarter of a century ago. We've come a long way since then. In fact, the CREATE bill is a major overhaul of the CITIRA bill that I started working on a little over a year ago.

The pandemic has changed us. It has changed the way we work, the way we live, and the way we do business. Necessarily, such an important fiscal measure would change, too.

Instead of just a 1% drop in corporate income tax, we are giving an immediate 5% drop, reduction of our corporate income tax rate, it will now stand at 25%. And for MSMEs, it will be 20% depending on certain conditions as reported earlier.

The CREATE bill seeks to provide a lifeline for struggling businesses affected by the ongoing pandemic, through the immediate and substantial reduction in our corporate income tax rate. This will be a game changer for all businesses - both big and small - who need as much support as they can get during this time of global health and economic crisis. Businesses will have more cash at their disposal, which they can use for inventory, for capital equipment, for employee benefits, and more.

We are hopeful that the revenues that the government stands to lose will provide the stimulus that our economy needs to rebound from the contraction it sustained last year. Reducing corporate income tax will also enable the Philippines to keep pace with our ASEAN neighbors in attracting foreign direct investments.

On the incentives side, the bicam version of CREATE remains consistent with our objective to make our fiscal incentives system more performance-based and time-bound. Our new incentives package aims to attract businesses that will create more jobs for our people and bring in technologies and innovations. It likewise promotes inclusive growth by offering higher incentives for those that will choose to invest in the countryside, as well as in areas recovering from disasters or conflict.

CREATE would be a fulfillment of previous attempts by past administrations to rationalize and instill accountability into our tax and fiscal incentives system. This will ensure that the benefits of the incentives we grant to various businesses will ricochet back to the Filipino public.

Furthermore, as highlighted earlier, CREATE aims to sustain the government's efforts to protect our people's health, which is very much in line with our sustainable development goal of ensuring good health and wellbeing for all. It shall strengthen our fight against the pandemic through the VAT-free sale and importation of COVID-19 drugs, vaccines, medical devices, and components of personal PPEs until 2023. In fact, we have not limited our interventions to COVID-19. Our measure will also exempt from VAT medicines for cancer, mental illness, tuberculosis, and kidney diseases.

Mr. President, now is the perfect opportunity to institutionalize these reforms, at a time when we are moving forward towards building back better for our nation and its people. We can finally end the unpredictability that prompted many investors to adopt a wait-and-see attitude before investing in the country, and at the same time, provide a much-needed respite from the effects of the pandemic, and cultivate an economic environment that ensures a more sustainable and inclusive recovery for the nation, even beyond the New Normal.

In conclusion, I would like to thank my colleagues, starting with the Senate President, who trusted me to shepherd this very important committee and this bill, thank you for your steady support, Mr. President... Our Majority Floor Leader, Sen. Juan Miguel Zubiri, who we all know made use of his many talents to get this bill moving... And Senator Ralph Recto, Senator Franklin Drilon, and Senator Angara, the former chairman of the Committee, and all our other colleagues who have participated in making this a better bill, making this the best possible version of CREATE.

Of course, we also acknowledge the support of our economic team - headed by no less than Finance Secretary Sonny Dominguez - to help us push forward this measure. As I mentioned, the finance and economic leaders of decades ago started advocating for such a measure, dating back to the 10th Congress, a quarter of a century ago. And it is now the 18th Congress. And finally, we have done it.

Mr. President, this is it. All 199 pages. It is an inch thick, a little bit more, I think. And although I only saw this now because I have been working paperless on this measure, but our current rules require that it is in printed form, so here it is.

It is my humble submission that the bicameral report on the disagreeing provisions of Senate Bill No. 1357 and House Bill No. 4157 on the Corporate Recovery and Tax Incentives for Enterprises, otherwise known as the CREATE bill, be ratified by this Chamber.

Thank you, my dear colleagues! Thank you, Mr. President.