NG amends CREATE Act’s IRR to ‘resolve’ RBE tax woes

By Jasper Emmanuel Y. Arcalas

THE national government (NG) has amended the implementing rules and regulations (IRR) of the CREATE Act to “resolve” value-added tax (VAT) concerns by “transitory” registered business enterprises (RBE) in the country.

Launch Of Brigada Eskwela 2023 In Qc

Teachers and volunteers of the Schools Division Office in Quezon collectively launch the “Brigada Eskwela 2023” with the theme “Bayanihan Para sa Matatag na Paaralan” at the Commonwealth Elementary School on Friday, August 11. Brigada Eskwela is a nationwide volunteer and community service program which started in 2003 that engages the stakeholders and hundreds of volunteers for the cleaning, refitting, and rebuilding of classrooms prior to the beginning of the school year. NONOY LACZA

By Butch Fernandez & Malou Talosig-Bartolome

DESPITE the disappointing secondquarter economic performance that saw GDP growth slowing to 4.3 percent, the full-year target “can still be met” if all sectors pull in weight and move quickly to recover lost ground, Sen. Imee Marcos and a private economist said Friday.

The Philippines, according to John Paolo Rivera, PhD, president and chief economist of Oikonomiya Advisory & Research Inc., can still attain its 2023 growth target of 6 percent despite the lower-than-expected growth from April to June.

“Kungkayabangmaabotanggovernment target na 6 percent— hindi naman natin sinasabing imposible kasi wala namang imposible,peromaymgakailanganggawin ang pamahalaan para ito ay maabot. [On whether we can still attain the government taregt of 6 percent—we are not saying its is impossible, because nothing is impossible, but the government must do something to reach it],” said Rivera in an open forum at the launch of his book at Rex Knowledge Center.

He traced that dismal second-quarter figure to the end of the “revenge spending” manifested a year after Covid-19 health protocols eased.

“Our economic slowdown today owes to the slowing consumption as savings of households are dwindling, coming from their revenge spending,” Rivera told BusinessMirror, speaking partly in Filipino.

For her part, Senator Marcos noted, in reaction to the Philippine Statistics Authority (PSA) report on Thursday: “The 4.3-percent Q2 GDP growth recorded as the slowest in two years, was affected mainly by: Inflation; the apparent dissipation of ‘revenge spending’ or lessening of consumer spending; and, agriculture output declining by 1.3 percent.”

All these factors, she stressed, “are important drivers of GDP growth,” and, therefore, the second-quarter data “must be seen as a challenge on what next steps should be taken so that the annual GDP target of 6-7 percent can still be met.”

So far, the senator noted: “for the entire first semester since January, GDP growth has already reached 5.3 percent.”

The work ahead LET’S work on further improving the employment situation so that disposable incomes can increase,” Marcos said, stressing that “efforts in doubling-up agriculture output are warranted.”

This being the case, Senator Marcos reminded that “we all know that climate change today has the greatest impact on agriculture output.”

“It is thus very clear that adaptation and mitigation measures have to be taken,” the senator stressed, noting that “support services that will increase agriculture output have to be in place.”

Agriculture was again the laggard in among production sectors in the secondquarter growth data.

Based on the PSA data, the Agriculture, Fishery, and Forestry (AFF) posted a growth of 0.2 percent in the second quarter and contributed a mere 0.01 percentage points to GDP growth.

E conomists both in government and the private sector earlier attributed the poor GDP data to a combination of factors: the absence of election-related spending, persistent inflation, the “lagged effects” of higher interest rates and lowerthan-expected government spending.

“The lagged effects of the uptick in interest rates last year and this year, we are feeling that now, especially in investment and even in households purchases of durable goods—those can be felt now because people postponed their spending on durable goods,” Neda chief Arsenio Balisacan told reporters on Thursday, partly in Filipino.

Meanwhile, Rivera thinks the Bangko Sentral ng Pilipinas (BSP) is in a delicate balancing act on whether to continue to tighten interest rate to tame inflation, at the risk of further dampening growth.

“This is the tricky part for BSP. Because they raise the interest rate to control inflation. But in raising the interest rate, it also becomes the reason for a slowdown. So they must balance that,” Rivera explained, partly in Filipino.

Based on the data available to the public, the economist thinks it is better for the BSP to “pause” the interest rate.

Ex-mayor Pelayo backs plan for water impounding facility in Candaba Swamp

CITY of San Fernando, Pampanga—

Three-term former Candaba mayor and two-time Pampanga Mayors

League president Jerry Pelayo has publicly supported President Ferdinand R. Marcos Jr.’s proposal to construct a waterimpounding facility in the Candaba Swamp as a long-term solution to the perennial flooding in Pampanga and Central Luzon. In a recent interview with broadcaster Ira Panganiban, Pelayo said, “When I was a mayor, I already suggested in a regional development council meeting that a ring dike is needed to collect the rainwater. I’m with the President on this matter. This could also be beneficial for aquaculture, irrigation for farmers, and tourism as well.”

Pelayo, known for his hands-on leadership during his tenure as Candaba mayor, firmly believes that the proposed water-impounding project will not only alleviate the perennial flooding issue but also provide a boost to local industries and tourism.

The former mayor, however, expressed his disappointment over Pampanga 4th

The amendment came about two weeks after President Ferdinand R. Marcos Jr. announced that the state would undertake necessary amendments to the CREATE Act and its IRR to address VAT-related woes raised by certain investors.

Finance Secretary Benjamin E. Diokno and Department of Trade and Industry (DTI) Secretary Alfredo E. Pascual approved the amendment to the CREATE Act’s IRR.

“We welcome this amendment in support of our RBEs and in alignment with the national government’s efforts to establish a more conducive investment climate in the country,” Diokno said on Friday.

The DOF said the amendment, specifically to Rule 18, Section 5 of the CREATE Act IRR, was made in response to the Marcos’ directive “to review and address the VAT-related issues” of both domestic market enterprises (DMEs) and registered export enterprises (REEs).

With the amendment, transitory registered DMEs inside an economic or a Freeport zone availing of the 5 percent gross income tax regime are now given the option to register as VAT taxpayers. By having such an option, VAT-registered DMEs can opt to get a refund from the Bureau of Internal Revenue for their input VAT.

“This will enable VAT-registered DMEs covered by the transitory provisions of CREATE to either charge output VAT to domestic customers or receive a refund from the Bureau of Internal Revenue [BIR] for the input VAT directly attributable to their zerorated sales,” the DOF said in a statement.

Furthermore, the DOF said transitory REEs, whose income tax-based incentives have, will continue to enjoy VAT zero-rating on their local purchases until such a time that the electronic sales reporting system under Section 237-A of the Tax Code is fully operational or until the expiration of the 10-year transitory period, whichever comes earlier.

“Before the approval of the CREATE IRR amendment, the technical working group [TWG] on VAT led consultations with investment promotion agencies and other relevant stakeholders. The TWG is composed of representatives from the Department of Finance, DTI, and BIR,” it said.

Last July, Marcos met with the executives of Marubeni Corp, Austal Ltd, and Tsuneishi Heavy Industries (Cebu), Inc. (THI) in Cebu City to discuss the situation of their business activities in the country.

During their dialogue, Marubeni raised the following issues: 12-percent VAT imposed on indirect exporters supplying goods and services to export-oriented enterprises; non-refund of VAT incurred by the DMEs on their local purchases; tedious documentary requirements, slow process, and unpredictability on VAT refund claims.

“We’re working on those issues and... we will be introducing the amendments for the CREATE law to take care of this,” Marcos was quoted as telling Marubeni’s executives.