Locators in Clark and Subic Bay Freeports, supported by big business groups, asked the government to suspend the implementation of new tax measures issued by the Bureau of Internal Revenue which limit the tax incentives and other fiscal perks enjoyed by exporters and importers.
The Clark Investors and Locators Association, Subic Bay Freeport Chamber of Commerce, together with the American Chamber of Commerce of the Philippines, Metro Clark Chamber of Commerce and Industry, Tarlac Chamber of Commerce and Industry, Metro Clark ICT Council and IT and Business Process Association issued a joint resolution that calls for the immediate suspension of BIR Revenue Regulation-21-2021 and Revenue Memorandum Circular 24-2022.
RR 21-2021 took effect in December 2021 to implement the amended value added tax incentives of registered export enterprises on their importations and local purchases, as provided under the Tax Code and the implementing rules and regulations of the Corporate Recovery and Tax Incentives for Enterprises Act.
RMC 24-2022 clarifies that VAT-registered REEs whose registration with an investment promotion agency has already expired should be subject to VAT.
The business groups also asked the government to review the IRR of the CREATE Act or Republic Act 11534.
“We appeal in the strongest term for the government to cure the situation by ordering the review and amendment of the IRR and the immediate suspension of Revenue Regulation-21-2021, Revenue Memorandum Circular 24-2022 in order to preserve the original intent of the CREATE Act,” the joint resolution read.
The groups alleged that the IRR and the BIR issuances effectively stopped the enjoyment of the tax incentive and other fiscal perks provided for by the CREATE Law. Some investor firms were reportedly levied with value added tax and other forms of taxes.
The CREATE Law provides for the lowering of corporate income tax, rationalizes and streamlines fiscal incentives with an inserted sunset provision that allows registered enterprises to continue enjoying the 5-percent tax on gross income earned up to 2031. Payment of GIE is an incentive in lieu of all national and local taxes.
The business groups said the IRR and BIR went beyond and against the provision of the CREATE Act which has a transitory provision in Section 311 of Chapter VI which allows for the continuation of the income tax holidays.
The groups said the BIR issuances “caused massive confusion as well as substantive impairment to the cost structure, business models and the viability of existing and potential investors.”
They said the business climate in the country had deteriorated and might lead the Philippines’ to further lag in the share of foreign direct investments in the ASEAN region.
They warned that if the issue on tax perks was not resolved, the Philippines’ ranking in global competitiveness survey of the World Bank might further slide down from 109th among 141 countries under the burden of government regulation category.