Have you ever been in so-called “survival mode” where what would matter most is just getting through the day? This has been the life that I have slowly become accustomed to in the past months. As a freshman law student, I often found myself at the point of almost breaking down during my first semester in law school. Juggling school and full-time work is certainly not a piece of cake, I must say, especially while enduring the “torment” brought about by a recently flunked recitation or quiz.

In the midst of those breakdowns, the only thing that kept me going was faith – faith in the belief that sometimes, things have to fall apart to make way for greater things. Many a time it was so convenient to just succumb to surrender. Nevertheless, I continued. Despite being lost at times, I managed to steer into the skid. I persevered and, lo and behold, I survived – and the semester was over just like that. Indeed, breakdowns can create breakthroughs.

Likewise, the Philippines has been experiencing a breakdown – an economic breakdown – even before the abrupt devastation caused by the coronavirus disease 2019 (COVID-19). Thus, in order to sustainably address the same, the Comprehensive Tax Reform Program (CTRP) was brought into the picture by the legislators. The Program’s first package, otherwise known as Tax Reform for Acceleration and Inclusion (TRAIN) law or Republic Act (R.A.) No. 10963, was passed into law in December 2017. However, whether the passage of the TRAIN law has been beneficial or not, so to speak, remains to be in question to this day.

It has been more than a year since the second package of the CTRP, also known as the Corporate Income Tax and Incentives Rationalization Act (CITIRA), was introduced by the legislators. Two versions of the said bill have reached the floor of the Congress: (1) House Bill No. 4157, which was approved by the House of Representatives on the third and final reading on September 10, 2019; and (2) Senate Bill No. 1357, the Senate’s version of the CITIRA which unfortunately was not tackled despite being classified as urgent by President Rodrigo Duterte.

In light of the COVID-19 pandemic and its accompanying implications, the country’s top economic advisers deemed it necessary to recalibrate the second phase of the CTRP in order to make it more responsive to the needs of businesses devoured by the economic crisis and to serve as a stimulus to recuperate from the substantial losses incurred by the country and a door for potential new investments. Formerly known as CITIRA, the redesigned bill is now referred to as the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

The salient proposed amendments in the CREATE bill are the reduced corporate income tax (CIT) rate, extended applicability of net operating loss carry-over for losses incurred during the current year, more flexible tax incentives, and longer sunset period for companies currently receiving tax incentives.

What seems to be the major subject of dispute in the abovementioned proposed measures, among others, is the immediate five (5) percentage point cut in the CIT rate beginning July 2020 – instead of the gradual decrease in a period of over 10 years under the CITIRA. In other words, once the said bill is passed, there would be an outright 5% reduction of the CIT rate until 2022 – bringing the rate to 25% from the current 30% – followed by a one (1) percentage point yearly reduction until 2027, hence the CIT rate would be reduced to 20% by that time.

Accordingly, the Department of Finance (DOF) has estimated that the proposed revised measures will cut government revenues by PHP 42,000,000,000 in the second half of 2020, and by another PHP625,000,000,000 over the succeeding five (5) years. The DOF believes that while these foregone revenues are to be sustained by the government, such are but tantamount to savings on the part of the substantially affected businesses which can be reinvested to thrive from the “breakdown” that these companies have suffered.

In view of the foregoing, the Department of Finance along with the private sectors from different business groups urge for the immediate passing of the CREATE bill. As a matter of fact, a group of thirty two (32) local and foreign business organizations (e.g., Philippine Chamber of Commerce and Industry, Federation of Filipino-Chinese Chambers of Commerce & Industry, Inc, FINEX, Philippine Center for Entrepreneurship, Management Association of the Philippines, et al.), through a manifesto, have expressed their support for the CREATE bill and have called on the Congress to quickly act and deliberate on the subject matter at hand. According to the said organizations, any further delay in the passage of the bill comes at the risk of losing more jobs and hemorrhaging more investments.

Considering that the Congress is in sine die adjournment beginning June 6, 2020 to July 26, 2020, it seems unlikely that the devastated taxpayers will experience the one-time, big-time cut in the CIT in July. Notwithstanding the foregoing, Senator Ralph Recto confirmed that the proposed CREATE may still hurdle the Senate before the year ends. Further, according to Senate President Vicente Sotto III, CREATE bill is among the priorities of the chamber.

However, despite the noble intention for CREATE to aid in the recovery of businesses and retention of the businesses’ employees, some economists expressed their opposition for the passage of CREATE due to the risk and uncertainty it carries; and its potential to lessen attractiveness to foreign investors.

On the other hand, there are also calls to break up CREATE into three separate bills, reflecting the three goals reposed in the proposed measures: (1) reduction of the CIT; (2) flexibility in the grant of incentives; and (3) longer sunset periods for business activities currently enjoying incentives.

Hence, it all boils down to the ultimate question: Can the CREATE bill really create the breakthroughs that the taxpayers have long been waiting for?

_{Novelyn C. Jose is an Associate from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.}

_{This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.}

_{The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email ph-inquiry@kpmg.com or rgmanabat@kpmg.com}