By Filomeno S. Sta. Ana III


Congress has finally ratified the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) bill. But controversy still hounds its passage in Congress.

CREATE is a pillar of the administration’s comprehensive tax reforms. In gist, the bill rationalizes fiscal incentives and makes corporate income taxation competitive. CREATE likewise has become a tool for the economic stimulus.

In short, CREATE was a priority bill. CREATE was supposed to have passed even before the pandemic broke out. The House of Representatives (HoR) in fact quickly passed a bill that was in full compliance with what the Executive and other stakeholders wanted.

Two principal objectives define CREATE: The first is to have fiscal incentives that are time-bound, performance-based, and transparent and that are tied to the strategic investment priorities. The second is to lower corporate taxation in response to what is admittedly an unhealthy global tax competition.

But the Senate took a longer time to pass the bill, as it went through intense, even acrimonious, debate. The Senate version diluted the HoR bill. Still, the end product reflected the acceptable compromises that would not undermine the bill’s essential reforms. To speed up the process, the President issued a certificate of urgency for the bill’s passage on third reading in the Senate.

Finally, the Senate passed the bill in late November 2020. For it expressed the political economy equilibrium, so to speak, without weakening the objectives and key features of CREATE, the initial consensus was for the HoR to adopt the Senate bill. Thus, having a bicameral conference committee (bicam), which is convened to reconcile the House and Senate bills, was no longer necessary.

But then came the twist. The HoR leadership asked for a bicam. Everyone else was surprised in light of an earlier agreement that the House would adopt the Senate bill. Anxiety again heightened. On not a few occasions, the talks before and during the bicam are opaque. The negotiators sometimes hide behind a veil of secrecy.

It took another two months before the bicam bill was hammered out. To be sure, the bicam bill, subsequently ratified by both houses of Congress, affirmed the essential objectives and features of CREATE.

But the CREATE bill that Congress finally ratified remains highly controversial. The bicam inserted provisions not found in either bill of the HoR and Senate.

What specifically are the objectionable insertions?

1. Chapter II (Tax and Duty Incentives), Section 295: “Crude oil that is intended to be refined at a local refinery, including the volumes that are lost and not converted to petroleum products when the crude oil actually undergoes the refined process, shall be exempt from payment of applicable duties and taxes upon importation….”

2. Section 296: “Tier II [items that are qualified to be covered by the Strategic Investment Priority Plan] shall include activities that produce supplies, parts, and components, and intermediate services that are not locally produced but are critical to industrial development and import-substituting activities, including crude oil refining...” [italics mine].

3. Chapter III (The Fiscal Incentives Review Board), Section 297: “Notwithstanding the provisions in the preceding paragraphs, tax and duty incentives granted through legislative franchises shall be excepted from the foregoing expanded powers of the Fiscal Incentives Review Board to review, withdraw, suspend, or cancel tax incentives and subsidies...” [italics mine].

4. Section 301: “Notwithstanding the provisions in the preceding paragraphs, tax and duty incentives granted through legislative franchises shall be excepted from the foregoing expanded powers of the President to review, withdraw, suspend, or cancel tax incentives and subsidies…” [italics mine].

To emphasize, the role of the bicam is to reconcile the differences in the Senate and HoR bills. Thus, any amendments can be made in a situation where the House and Senate bills differ.

The Philippine Constitution is clear on this matter. Article VI. Section 26 (2) states: “Upon the last reading of the bill no amendment thereto shall be allowed, and the vote thereon shall be taken immediately after, and the yeas and nays entered in the Journal.”

Here is what Section 62 (on Conference Committee) of the Rules of the House of Representatives (18th Congress) states: “In resolving the differences between the two measures, the House panel shall, as much as possible, adhere to and support the House bill or joint resolution. If the differences with the Senate bill or joint resolution are so substantial that they materially impair the House bill or joint resolution, the panel shall report such fact to the House for the latter’s appropriate action.”

Further, the Senate’s Legislative Process in the 18th Congress states under the section of Authority of Conferees says:

“The authority given to the Senate conferees theoretically is limited to matters in disagreement between the two chambers. They are not authorized to delete provisions or language agreed to by both the House and the Senate as to draft entirely new provisions.

“In practice, however, the conferees have wide latitude, except where the matters in disagreement are very specific. Moreover, conferees attempt to reconcile their differences, but generally they try to grant concession only insofar as they remain confident that the chamber they represent will accept the compromise.”

We can argue that the aforementioned insertions violate the spirit and letter of the Constitution as well as the internal rules of both houses of Congress. The insertions are “entirely new provisions,” and they are not connected to disagreements or differences found in the Senate and HoR bills.

In this regard it is worth citing a passage from the Supreme Court en banc resolution: G.R. No. 115455, October 30, 1955, consolidating the cases Arturo M. Tolentino v. The Secretary of Finance and The Commissioner of Internal Revenue, and others. In this resolution, the Supreme Court quotes a 1979 study:

Conference committees may be of two types: free or instructed. These committees may be given instructions by their parent bodies or they may be left without instructions. Normally the conference committees are without instructions, and this is why they are often critically referred to as “the little legislatures.” Once bills have been sent to them, the conferees have almost unlimited authority to change the clauses of the bills and in fact sometimes introduce new measures that were not in the original legislation. No minutes are kept, and members’ activities on conference committees are difficult to determine. One congressman known for his idealism put it this way: “I killed a bill on export incentives for my interest group [copra] in the conference committee but I could not have done so anywhere else.” The conference committee submits a report to both houses, and usually it is accepted. If the report is not accepted, then the committee is discharged and new members are appointed.

(R. Jackson, Committees in the Philippine Congress, in Committees and Legislatures: A Comparative Analysis 163 [J. D. Lees and M. Shaw, eds.]).

Nonetheless, said the Supreme Court, “we pass no judgment on the methods of conference committees.” One must thus go back to the rules set by Congress. But the critical point in the above passage is how it exposes the undemocratic nature of the bicam’s conduct. One single congressman can kill a bill in the bicam to serve his interest group, which “he could not have done so anywhere else.”

The objection to the insertions in the CREATE bicam bill is not just about the legally questionable and unethical manner of its approval. The objection likewise concerns the very wisdom of such insertions.

Giving tax incentives to a local crude oil refinery without it being subject to debate and scrutiny and exempting legislative franchises from the review powers of the Fiscal Incentives Review Board and the President are arbitrary, discriminatory, and unfair. They likewise challenge economic principles and logic.

The President should thus use his line-item veto power to reject these insertions.

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.