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Chump change for SMEs! Mareng Winnie says only big companies will benefit from CREATE bill

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Only large corporations will benefit from the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Act), the second tranche of the administration’s tax reform package, said former socioeconomic planning secretary Winnie Monsod.

In her July 4 column for the Philippine Daily Inquirer, Monsod expressed doubt over the Department of Finance’s (DOF) claim that the P625 billion in foregone revenues from corporate income tax will translate into economic stimulus for micro, small and medium enterprises (MSMEs).

Based on data on MSMEs from the Senate Economic Planning Office, Monsod said only 12,305 SMEs or 19 percent of the total 774,664 MSMEs are corporations.

“Most, if not all, of the large enterprises are corporations. Who do you think is going to benefit most from reduced income taxes and extended incentive periods—the large or the SMEs?” she said.

CREATE proposes an outright five percent reduction in income tax rates after its passage. The corporate income tax will be reduced further by one percent yearly starting 2023 until 2027, so the rate will only be 20 percent by that time.

Monsod said passing the CREATE bill will not help MSMEs. Quoting former Finance Undersecretary Milwida Guevarra, she said SMEs are unlikely to benefit from income tax rate reduction as 73 percent of them are operating at a loss.

Guevarra said losing firms do not have to pay corporate income tax.

“A corporate tax rate cut will not answer the liquidity problems of firms. Paying the corporate tax is perhaps the least concern of small enterprises,” Monsod quoted Guevarra as saying.

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