Duterte signs CREATE law with vetoed provisions
MANILA, Philippines — President Rodrigo Duterte has signed the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act but vetoed several provisions, including tax exemption thresholds for socialized housing, Malacañang said Friday.
“I confirm that CREATE law has been signed with some items vetoed,” presidential spokesperson Harry Roque said Friday in a message to reporters.
The law cuts corporate income tax from the current 30 percent, the highest in Southeast Asia, to 25 percent for large corporations and 20 percent for micro, small, and medium enterprises.
In a message to Congress leaders, Duterte said the law “comes at an opportune time since this will serve as a fiscal relief and recovery measure for Filipino businesses still suffering from the effects of the COVID-19 pandemic.”
However, the President vetoed several provisions, providing a value-added tax (VAT) exemption threshold for socialized and low-cost housing to P2.5 million and P4.2 million for house and lot.
Article continues after this advertisement“[T]his will benefit even those not originally targeted for the VAT-exemption—those who can actually afford proper housing. This results in a tax exemption that is highly distortive and exacts a heavy price on the taxpaying community,” Duterte explained in his veto message.
Article continues after this advertisement“The provision is also prone to abuse, as properties can be parceled into lots so that their individuals values fall within the VAT-exempt threshold. If not vetoed, the estimated revenue loss from the foregoing is P155.3 billion from 2020 to 2030, which could be used in public goods to benefit the poor directly,” he added.
The President also vetoed the 90-day period to process general tax refunds, saying it would be “administratively difficult” for the Bureau of Internal Revenue to implement. Duterte cautioned it might cause delayed or erroneous processing of refund claims.
Further, Duterte vetoed the provision setting a P1-billion threshold for investments required to get approval from the Fiscal Incentives Review Board (FIRB).
The President also rejected the automatic approval of applications for incentives if not acted upon within 20 days from submission as it “runs counter to the declared policy to approve or disapprove…based on merit.”
Duterte said inaction could be addressed by the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, which punishes failure to render government services within a prescribed time.
