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Tax measures and the promise job creation

Simply put tax measures enacted by the government either regressive or progressive are considered the lifeblood of a country. In a civilized society, citizens pay taxes to the government without hindrance. Automatically without taxes the government would be paralyzed to operate. It can be likened to a person diagnosed with anemia.

Looking back at the universal taxation system, the Value-Added Tax (VAT) developed by Frenchman Maurice Laure in 1954. It was the Arroyo adminis.tration who added two percentage points to the original 10% VAT ceiling. Congress originally opposed the controversial measure.

With the strong intention pushing to nurse back the country’s fiscal health, the Malacañang initiated tax measure “is by nature a passthrough tax” based on consumption and therefore must be shouldered by end-users.

Apparently, the tax reform package was elevated to the Supreme Court, questioning among others the constitutionality and legality, that Congress has the sole authority to legislate any tax measures and not Malacañang.

Due to threats of massive protest actions, the two-month-old temporary restraining order (TRO) the expanded value-added tax (E-VAT) was put in limbo but eventually was resolved by the High Tribunal on November 1, 2005, a time when the living remembered the dead.

Thus, the E-VAT law was described as the cornerstone of the government’s efforts to escape a looming fiscal crisis. The taxpayers were ready to bite the bullet for the sake of the economy.

Among the 10-member ASEAN countries, the Philippines has the highest value-added tax, at a flat rate of 12 percent.

All told. The revenue generating measure of the Arroyo administration was anchored to strengthen and expand micro-finance and entrepreneurship and promote new investments that would fulfill her promise to create six to 10 million jobs during her term.

Under the Duterte administration, a tax reform package, Corporate Income Tax and Incentives Rationalization Act (CITIRA), formerly named Tax Reform for Attracting Better and High-Quality Opportunities or the “Trabaho” bill is enacted.

The commonalities of the two tax measures. Again, it announces of over a million jobs to be created by corporate income tax cuts under the law.

“It would rationalize the fiscal incentives given to some businesses by putting time frames on them and linking their enjoyment to certain parameters, such as job generation, use of local inputs and workers training” stated a report by the Inquirer.net.

The law is the second phase of the Duterte’s tax reform program after the enactment of the Tax Reform for Acceleration and Inclusion (Train) Law.

Originally, the CITIRA bill has met strong oppositions from the Philippine Economic Zone Authority (PEZA), the Department of Trade and Industry (DTI) and some foreing chambers of commerce and industry.

Added to the list of disgruntled sectors, is the largest labor group, the Trade Union Congress of the Philippines (TUCP), stating among others, who questioned the P500 million annual government subsidy for workers that may lose their jobs when the bill is implemented.

The dangling of yearly budget allocation for the passage of the tax measure is highly insufficient compared with the day-to-day expenses amid rising cost of living created by TRAIN, added Congressman Raymond DC Mendoza, TUCP Party-List.

A business group estimated over 700,000 workers will be retrenched in economic zones in exchange for lower corporate income taxes (CIT).

Stakeholder concerns and issues from oppositors were reportedly resolved, the bill was passed and approved in the Senate, SB No. 1357, otherwise known as “Corporate Recovery and Tax Incentives for Enterprise Act (CREATE) Bill.

It was approved on third and final reading by the Senate on November 26, 2020. The CITIRA was among the priority bills endorsed by President Duterte in his 4th SONA last July 2019.