THE measure that will amend the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act of 2021 needs to have a 10-year performance review mechanism to signal to investors that the incentive regime will remain stable for a predictable amount of time, the former head of the Philippine Economic Zone Authority (PEZA) said.
“A provision must be written in the CREATE MORE for a review of these incentives every 10 years,” former PEZA Director-General Charito B. Plaza said via text message.
She added that the review will serve as a performance evaluation by measuring whether incentives have helped increase investment, aided in the growth of local government units (LGUs) hosting the locators, and addressed poverty.”
The CREATE Act is in the process of being modified by legislation known as CREATE MORE (Maximize Opportunities for Reinvigorating the Economy).
Ms. Plaza contends that the move to amend CREATE after only three years has given off the impression that the government “keeps on changing our rules in the middle of the game and keeps on fixing things that are not broken.”
Last week, Congress ratified the proposed CREATE MORE bill. The new measure address concerns raised by investors about issues like how much work must be physically performed in economic zones for locators to continue enjoying their incentives.
The new bill also clarifies who can grant incentives to locators, known as registered business enterprises (RBEs).
Under CREATE MORE, the President will be given the power to grant nonfiscal incentives to enterprises without the need for a recommendation by the Fiscal Incentives Review Board (FIRB).
The FIRB’s powers have been defined as exercising “policymaking, oversight, regulatory, and quasi-judicial functions on the administration and grant of tax incentives by the investment promotion agencies (IPAs) and other government agencies administering tax incentives.”
CREATE MORE also expands the powers of IPAs to grant incentives.
The new measure increases the investment threshold for projects that IPAs can approve on their own to P15 billion from less than P1 billion previously. The current law empowers only the FIRB to approve projects worth P1 billion or more.
CREATE MORE also gives the FIRB the authority to cancel, suspend, or withdraw fiscal incentives, upon the recommendation of IPAs.
Eleanor L. Roque, tax principal at P&A Grant Thornton, said the new measure ensures that the FIRB exercises oversight over fiscal incentives granted to RBEs.
“If there were abuse of discretion in the past or conflicting interpretation of the laws, the FIRB can supervise the various agencies and exercise regulatory functions,” she said via Viber.
However, Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said the CREATE MORE bill weakens the FIRB’s capacity as a regulatory body that can rein in the IPA tendency to offer incentives inappropriately.
“The past has shown that IPAs are motivated by attracting investments mainly through incentives, even if such incentives are redundant or inappropriate. The IPAs are not mindful of the huge opportunity costs arising from the forgone revenue,” he said via Viber.
CREATE MORE is a priority bill, as identified by the Legislative-Executive Development Advisory Council. The bill has yet to be transmitted to Malacañang for President Ferdinand R. Marcos, Jr.’s signature. — Beatriz Marie D. Cruz
