INVESTORS at the Clark Freeport warned that their viability and competitiveness would be in peril if the government will not suspend the implementing rules and regulations (IRR) of Create Act as well as two issuances of the Bureau of Internal Revenue.
In a manifesto, the Clark Investors and Locators Association (CILA) said the questionable provisions of the IRR run counter with the intent of Republic Act 11534 or the CREATE Act passed by Congress on February 3, 2021.
CILA is also urging the suspension of BIR issuances Revenue Regulations 21-2021, and Revenue Memorandum Circular 24-2022 that were issued on December 3, 2021 and February 23, 2022, respectively.
The manifesto was issued during the first general membership meeting of CILA last March 27, with Sen. Risa Hontiveros as the guest of honor and speaker.
The organization fears that there will be “massive opportunity costs for the Philippine economy in terms of job creation, foreign direct investments and exports.”
As of December 2022, there are 1,096 foreign and local investors in this Freeport. Possible closure of Clark enterprises would also jeopardize around 128,000 jobs.
CILA said the questioned provisions would definitely put a setback to the nation’s economy as Clark Freeport investor-firms have combined investments of US$5.42 billion while the exports have been valued at US$5.47 billion.
These revenue regulations issued by the BIR “went beyond bounds and are contrary to the original intent of the CREATE Act,” the manifesto stated.
CILA echoed this observation first made by Rep. Joey Salceda, chairman of the House Ways and Means Committee, Rep. Gloria Macapagal-Arroyo, Sen. Risa Hontiveros, Sen. Aquilino Pimentel Jr. and former Justice Elpidio Vega, head of the Office for Government Corporate Counsel.
“We continue to make an appeal for the government to cure the situation by ordering the review and amendment of the IRR and the immediate suspension of RR-21-2021, RMC 24-2022 in order to preserve the original intent of the CREATE Act,” the investors said.
“While the CREATE Act passed by Congress, extended a sunset provision of 10 years for all registered business enterprises (RBEs) currently enjoying fiscal perks, the IRR that was crafted by the DOF introduced a distinction between export enterprise (EE) and domestic market enterprise (DME) and prescribed different treatments for each category. This has resulted in the loss of fiscal perks for several RBEs that were supposed to be covered by the CREATE Act” the manifesto further stated.
The aforesaid BIR issuances have led to the premature imposition of VAT on investors in Clark and other Freeport and Economic Zones whose locators are to pay only five percent of their Gross Income Earned (GIE) as part of the incentives.
These subsequent issuances after the adoption of IRR “negated the cross-border doctrine and created enormous confusion among investors and taxpayers alike and may lead to divergent interpretations in the treatment of VAT and all other related taxes.
CILA said failure to immediately address this conflict with the CREATE Act would lead to “further erosion of the Philippines’ competitiveness in comparison to its ASEAN neighbors and other comparative economies and the exclusion of small and medium enterprises (SMEs) outside of the freeport zones from participating in the global value chain.”
Senator Hontiveros said that the IRR and said BIR issuances run counter to the intent of the CREATE law.
“I believe this is a serious issue, and risks driving investments away from the country, and deviates from the policy embodied in the CREATE Law which is, among others, to attract investments by developing a more responsive and globally-competitive tax regime, “ she said.
“The deviation of the aforementioned issuances from the intent of the CREATE Law risks directly and adversely affecting the cost of doing business for domestic industries,” she added.
Hontiveros, together with Rep. Gloria Macapagal-Arroyo at the House of Representatives, has championed the cause of Clark locators. She has filed a resolution that calls for the congressional oversight committee on tax reform program to address the conflict.
Arroyo, on the other hand, has filed a separate resolution that urges the House Ways and Means Committee to look into the cross border doctrine that should apply at Freeports which are separate customs territory.
The resolution stated that that the cross border doctrine has been rendered “ineffectual and inoperative” and is inconsistent with the Create Act.
