NAME: _________________________________ SECTION: ___________________

HIGHLIGHT AND LABEL

(highlight text sing word highlighter and add comment to label and answer items 1-5)

1. Which sentence in the introductory paragraph puts forward the thesis of the essay? (1 point)

2. Highlight and label supports/pro-argument to the thesis. (points may vary)

3. Highlight and label 1 evidence provided for every support/pro-argument. (points may vary)

4. What counterclaim is/are stated in the text? Highlight and label. (points may vary)

5. Highlight and label the part of the conclusion which reiterates the stand of the writers. (2 pts.)

6. Does the text conform to the characteristics identified by Ward (shown in the picture below)?
Which particular characteristics are observed? Explain why. Answer in 3 items. (6 points)

Your Answer for Item 6:

1. _______________________________________________________________

2. _______________________________________________________________

3. _______________________________________________________________

Rubric per bulleted item: 2 pts. – answer is accurate and justified

1 pt. – answer is somewhat accurate but not
 justified

CREATE Act Implementation: Beneficial or Detrimental

Alonzo, R.; Awa, C.; Dizon, Karl S.; Escalona, S.; Justaga, E.; Venus, T.

On March 9, 2020, the CITIRA bill, presently the Corporate Recovery and Tax
Incentives for Enterprises (CREATE) Act, was verified as necessary by President Duterte and
introduced in the SONA as one of his priorities this year just as in previous years. However, is
the CREATE bill beneficial to the public and the country's economy? Or does it have a
detrimental effect? CREATE Act is a recalibration of the CITIRA Bill that was proclaimed in
September 2019, which intends to decrease the corporate income tax and rationalize specific tax
incentives (Department of Finance, 2020). The revised bill would improve the President's ability
to approve tax and non-tax incentive packages to favor Filipino citizens to attract new
investment. As stated by the Department of Finance (2020), the bill was proposed to be
recalibrated to make it more consequential and attuned to organizations adversely influenced by
the COVID-19 pandemic and improve the Philippines' capacity to attract investments that will
serve the public interest. The proposition has undergone many modifications every time it is filed
in the senate, from TRABAHO to CITIRA and then CREATE. Through that, the country’s chief
executive is under the impression of the swift passage of the act in this time of unprecedented
economic state. Concomitantly, this paper asserts that the implementation of the Corporate
Recovery and Tax Incentives for Enterprises should be continued, for it is a great way to boost
the Philippines economy since it creates more job opportunities due to the reduced corporate
income tax, it is more flexible when it comes to granting incentives, and it aids the country in
overcoming losses with a more extended sunset period.

To start, one benefit of the CREATE Act is that there will be a considerable reduction in
the corporate income tax, making businesses grow and provide more jobs for the citizens. The
corporate income tax rate will be lessened from 30 to 25 percent, including a one percent
decrease until 2027 (Medina, 2020). The reduction in CIT will help the country recover from the
losses that it has experienced from the COVID-19 pandemic; this will be a great way to improve
the Philippines’ economy. One of the difficulties that resulted from the pandemic is the
unemployment rate rising that reached 4.6 million Filipinos to lose their jobs (Trading
Economics, 2020). Accordingly, CREATE will benefit up to 90,000 micro, small, medium-sized
enterprises (MSMEs), decreasing expenses for taxes, and generating a more significant profit.
The benefits that the businesses will get will help them become bigger and expand their
businesses by hiring new employees, which can solve the high unemployment rate during the
lockdown. According to the Department of Finance (2020), the quickened reduction of CIT will
also help the country interest multinational firms that want to expand their production
connections, creating job opportunities for Filipino citizens globally.

Moreover, the more outstanding reduced Corporate Income Tax will also increase the
country’s chance to be nearer to the ASEAN CIT rate of 22%, which will boost businesses’ cost
competitiveness. With the mixed demographic and financial fundamentals, the lower CIT will
strengthen the country when it comes to bigger and better investments (Department of Finance,
2020). Economic price competitiveness can help businesses survive in a financial crisis, and
improved investments in the country will help companies improve business operations and
increase sales. Hence, a reduction in corporate income tax will be beneficial to SMEs or
businesses to increase investors and job opportunities for the Philippines’ economy.

However, one flaw of the CREATE Act is that it will reduce government revenue. This
act is seen to lose more than a billion pesos due to the 5-percent reduction of the Corporate
Income Tax (CIT) rate. According to the Department of Finance (2020), the total increment
revenues will go down to merely 80.95%, and between 2020-2027, a P667 billion revenue loss
will occur as expected. According to doctors Cororaton and Tiongco (2020), as cited by Rada
(2020), employment and real wages will generally decline, and poverty increases. Despite this
disadvantage, according to the Department of Finance (2020), the instant decrease of corporate
income tax will significantly help draw in multinational companies seeking alternative sourcing
markets. Reducing the CIT gives a direct infusion of businesses' financial assistance, providing
more resources to retain more of their employees, and keeping up with their financial difficulties.
The CREATE Act has a package of reforms that will help businesses recover and ensure their
resilience and have more sustainable economic opportunities, such as increased job hirings. This
will eventually result in increased government capital to overcome the loss from the
implementation of the act.

Another advantage of CREATE is that it makes it more flexible to impart incentives. As

it is associated with, incentives can enhance economic growth. Since the CREATE Act makes it
more flexible, there are modified systems in executing tax incentives to be decided by
government officials. Unlike in the CITIRA Bill, the CREATE Act involves the Fiscal
Incentives Review Board (FIRB) to review fiscal and non-fiscal recommendations to the
President, including tax incentives, logistics support, and training certification from government
agencies (Medina, 2020). As the Department of Finance (2020) asserts, the FIRB will provide
necessary adequate governance measures to advance the public’s interest in granting tax
incentives to corporations. The FIRB will also ensure that registered businesses will deliver
works and investments they promised in a contract with the incentives. Additionally, it will also
create more jobs for Filipino citizens, and it is obtainable for MSMEs to avail.

Following Ernst and Young LPP (2020), the President will have authority in modifying
the combination, term, and procedure of granting the incentives for eminently promising projects
or other actions with grant not surpassing 40 years. With this new modification, the President
will be able to mix beneficial and efficient incentives for business enterprises. Another part of
the rationalization provides a new set of performance-based incentives, targeted, time-bounded,
and transparent (Lim, 2020). The government can maneuver the tax collections, preventing
virtual loss while strategically granting incentives through the CREATE Act.

The act, nevertheless, will also negatively affect businesses in the Philippines by
increasing Corporate Taxation. According to (Golez, 2020), optional standard deductions will
remain at 40% for non-resident foreign corporations; however, capital gains have increased from
10% to 15%. The Corporate Recovery and Tax Incentives for Enterprises Act is the last thing
businesses need. However, the statement that businesses do not need the said act is not entirely
assured. The CREATE will benefit businesses regarding the granting of tax incentives and the
low CIT, which can help businesses have lowered expenses in taxes and generate more
significant investments. According to a study by the Department of Labor and Employment
(2020), mentioned by the Department of Finance (2020), the decrease in corporate income tax
will be supplemented by a revamp in the tax incentives method for companies that will urge
economic development, create more jobs, and lower the poverty rate. This ensures that the
CREATE Act will create more and better employment opportunities for the workers, especially
for MSMEs and businesses in underdeveloped regions.

Lastly, the CREATE Act has enough time for registered business activities to enjoy the 5
percent tax on gross income earned (GIE) incentive with the prolonged sunset period. In turn,
businesses will have a sufficient period to recalibrate and the government to jumpstart their
economy due to the act's more extended implementation. In the CITIRA Bill, the sunset period
was 2-7 years. Under CREATE, it has extended the period to a minimum of four and a maximum
of nine years (Lim, 2020). One substantial reason for the generous period of the tax incentives is
because it responds to one of the challenges in doing business in the Philippines - paying taxes.
There is a flat rate of 30% of corporate income tax in the country, and there are a massive 47 tax
payments to make each year, which consume an average of 193 business hours. Tax rates are
crucial because they correlate to the amount left for the business to fund its capital. This issue is
where CREATE is responsive to businesses' current state, making tax expenses less costly as the
country has never been more susceptible to economic depression.

Furthermore, the extension will grant enough time for companies to cope with the new
CIT collection. According to Medina (2020), IPA-registered companies paying the existing five
percent gross income earned (GIE) tax incentive will have their sunset period extended by two
years to adjust to the new incentive scheme. More so, existing business projects and activities
with existing incentives may still benefit from the new incentive package. The DoF and
Congress clarified in various business industry meetings that the projects or activities already
registered are still allowed to apply under the new incentive package if qualified under the SIPP
after the sunset period (Lim, 2020). Along with its essential reformations, the CREATE Act has
a strategic timeline that is a win-win for both businesses and the government. With CREATE,
the Philippine economy's likelihood to remain one of the fastly growing economies among its
ASEAN countries counterparts is high.

Contrastly, the CREATE Act will cause a problem that triggers inflation. Due to reduced
taxes, the government will have to increase the prices of goods to make up for the lost revenue
(Staff Report, 2017). This will decrease the purchasing power to purchase products for their
needs and wants. Businesses will have fewer sales due to the reduced number of consumers
buying their products. Resulting from decreased purchasing power, inflation will cause an
increase in the rate of poverty. Inflation will also discourage investments and savings that will
subject a great loss to individuals and businesses. Besides the fact that it will increase inflation,
the stated act will reduce poverty in the country, disregarding inflation's negative effect on
purchasing power. A study supported by the Asia Development Bank (2020), cited by
Department of Finance (2020), stated that the bill would level the playing field all over the
country, causing it to flow to direct investments in foreign countries, leading to a reduction of
prices in consumer goods. With the deficit kept by the original CITIRA as envisioned by the
government at 3.2 percent, and the "Build, Build, Build" program in full swing, the services and
agriculture sectors will benefit the most from employment in the corporate tax reform. Since
CREATE increases jobs significantly larger in the skilled than in the unskilled sector.

Hence, the evidence from government departments and professional personages shows
that the CREATE Act would significantly boost the Philippines’ economy. Despite the slight
disadvantages, CREATE creates more job opportunities due to the reduced corporate income tax,
increases flexibility in granting incentives, and aids the country to overcome losses with a more
extended sunset period. The act is beneficial, immensely, that it will help businesses, individuals,
and the government subdue damages caused by the pandemic. The government should inform
the citizens of the CREATE Act and its effectiveness. To address news, especially to small and
medium-sized enterprises (SMEs), giving them more information on how it would benefit them
and the Philippines' economy. The pandemic has damaged the country's economy, so the
CREATE Act and its benefits should be considered for implementation.

References:

Department of Finance. (2020, February 10). DOF says FIRB to promote good

governance, enhance grant of tax incentives to firms - Department of Finance.

Department of Finance. https://www.dof.gov.ph/dof-says-firb-to-promote-good-

governance-enhance-grant-of-tax-incentives-to-firms/

Department of Finance. (2020). DOF welcomes DOLE-commissioned study showing

CREATE bill will generate jobs, lower poverty incidence | Comprehensive Tax

Reform Program • #TaxReformNow. Dof.Gov.Ph.

 https://taxreform.dof.gov.ph/news_and_updates/dof-welcomes-dole-commissioned-

study-showing-create-bill-will-generate-jobs-lower-poverty-incidence/

Department of Finance. (2020). Economic managers propose 4 legislative ‘imperatives’ to

ensure strong, sustainable, resilient PHL recovery | Comprehensive Tax Reform

Program • #TaxReformNow. Dof.Gov.Ph.

https://taxreform.dof.gov.ph/news_and_updates/economic-managers-propose-4-

legislative-imperatives-to-ensure-strong-sustainable-resilient-phl-recovery/

Department of Finance. (2020). Package 2: Corporate Recovery and Tax Incentives for

Enterprises (CREATE) Act | Comprehensive Tax Reform Program •

#TaxReformNow. Dof.Gov.Ph. https://taxreform.dof.gov.ph/tax-reform-

packages/p2-corporate-recovery-and-tax-incentives-for-enterprises-act/

Department of Finance. (2020). PCCI head says CREATE to give PHL ‘fighting chance’

in attracting more investments | Comprehensive Tax Reform Program •

#TaxReformNow. Dof.Gov.Ph.

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fighting-chance-in-attracting-more-investments/

Ernst & Young LLP. (2020). Philippines enhances proposal for corporate tax reform to

promote investment. Ey.Com. https://taxnews.ey.com/news/2020-1593-philippines-

enhances-proposal-for-corporate-tax-reform-to-promote-investment

Golez, K. (2020, May 14). How TRAIN 2 will affect businesses in the Philippines.

https://kmcmaggroup.com/research-insights/2019/how-train-2-will-affect-businesses-in-

the-philippines/

Lim, M. (2020, June 4). Take 3 on Package 2. https://www.pwc.com/ph/en/taxwise-or-

otherwise/2020/take-3-on-package-2.html

Medina, A. (2020, June 4). The Philippines Prepares New Stimulus Program: CREATE
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 Nicolas, B. D. (2020, August 27). 'CREATE' bill to cost govt P249B in revenue

https://businessmirror.com.ph/2020/08/28/create-bill-to-cost-govt-p249b-in-revenue/?

fbclid=IwAR14JLDDeOZA57G6A_g4UhhzUKzfQmCS7AMVhCbHmTCK8buNOGdOH

Z2Gbys

Ordinario, C. (2020, June 2). 'CREATE' bill's ok now bad timing-experts: Cai Ordinario.

https://businessmirror.com.ph/2020/06/03/create-bills-ok-now-bad-timing-experts/

Rada, J. (2020, August 30) CREATE bill to generate jobs, cut poverty study

https://manilastandard.net/mobile/article/332799

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https://www.pna.gov.ph/articles/1104017