The Philippine Stock Exchange, Inc. (“PSE”) and the Philippine Dealing System Holdings Corp. (“PDS”) strongly support the passage of the Corporate Recovery and Tax Incentives for Enterprises (“CREATE”) Bill.
The CREATE Bill is another landmark bill in a series of reform measures undertaken by this administration, led by the Senate of the Philippines, House of Representatives and the Department of Finance, to institute much-needed improvements in the tax system.
The PSE and PDS believe that the immediate lowering of the corporate income tax to 25% effective July 1, 2020, will make the country’s tax rates more competitive vis-à-vis its peers in the ASEAN region and make the Philippines an attractive investment destination and the domestic capital market a viable venue for fundraising.
For publicly-listed companies, in particular, the reduction of corporate income tax will undoubtedly redound to the benefit of the Philippine economy as it will leave more funds in the hands of the listed companies either for business expansion or distribution to stockholders. The investment of said tax savings in other business undertakings or investment vehicles can set off a chain of positive economic consequences such as employment generation, higher spending, and increased domestic business activity as a result of the multiplier effect.
We also support the expansion of the list of transactions qualifying as tax-free exchanges in Section 40(C)(2) of the National Internal Revenue Code and removal of the requirement to obtain a prior Bureau of Internal Revenue confirmation or tax ruling for purposes of availing of the benefit in Section 40(C)(2). This will streamline the process of reorganization typically conducted by companies preparatory to going public. This is a very welcome development and a move that has long been clamored for by the market.
We are optimistic that the above reforms, together with the removal of the Initial Public Offering tax in Republic Act No. 11494 or the Bayanihan to Recover as One Act, will spur business creation in the Philippines, incentivize capital-raising activities in the Philippine capital market, and overall, accelerate the country’s recovery from economic losses brought about by the COVID-19 pandemic.
We respectfully urge both houses of Congress to prioritize the immediate passage of the CREATE Bill so that the country can fully reap the benefits of this reform bill without delay.