LONG-RUNNING concerns about red tape and value-added tax (VAT) refunds stand a good chance of being addressed by the proposed amendments to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, according to analysts.
Calixto V. Chikiamco, an economist, said that the CREATE law introduced issues that need to be fixed via amendment.
CREATE “did not result in increased foreign investments and, in fact, dampened them,” he said, citing the ASEAN Investment Report 2024.
“That is why Congress is trying to remedy the situation by passing CREATE MORE to address the issues that investors are raising, from the bureaucracy involved in getting approvals from the Fiscal Incentives Review Board (FIRB) to the value-added tax rebate,” he said via Viber.
The report cited the challenges faced by multinational enterprises in obtaining VAT refunds, with the cumbersome process blamed for the scaling down of some multinational operations.
However, Mr. Chikiamco said that these issues could be resolved through the passage of the CREATE MORE or the CREATE to Maximize Opportunities for Reinvigorating the Economy bill.
Congress passed the CREATE MORE bill in September, which will grant registered business enterprises (RBEs) a VAT zero rating on local purchases, a VAT exemption on imports, and duty exemptions on imports of capital equipment, raw materials, spare parts, and accessories.
Under CREATE MORE, the government plans to establish an enhanced VAT refund system that grants refunds of creditable input taxes within 90 days from the filing of applications.
The bill also tasks the Department of Finance with establishing a VAT refund center to handle the electronic processing and granting of refunds or creditable input taxes.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the bill will help bring about greater certainty and improve the investment climate for RBEs.
“That would make foreign investors more decisive about locating in the Philippines,” he said via Viber.
However, he said that the government should also work on further easing the cost of doing business, reducing electricity costs, keeping regulations stable and predictable, enhancing the dispute resolution process, and improving infrastructure.
The CREATE MORE bill also proposes to put into law the increased threshold for investments that investment promotion agencies (IPAs) can approve on their own authority.
Under the bill, IPAs such as the Board of Investments and Philippine Economic Zone Authority will be given back the power to offer incentives for projects worth up to P15 billion, without needing to go up to the FIRB. — Justine Irish D. Tabile