Dear President Duterte,

Thank you for making the comprehensive tax reform program a top priority of your socio-economic agenda! As a tax advocate, I can attest to the many tax policy and administration reforms implemented in your administration under the leadership of Finance Secretary Carlos Dominguez and Commissioner of Internal Revenue Caesar Dulay.

Again, I write this open letter to give my unsolicited advice before you sign into law the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill which will lower the corporate income tax rate from 30% to 20%. 

If the goal is to make our tax system simpler, fairer and more efficient, and to provide tax relief measure especially for small businesses during this pandemic, then it’s a no-brainer to lessen the burden of taxpayers while collecting much needed revenues from those who earn more. 

When you lifted the implementation of excise tax in 2018, I wrote and published my first open letter to you, and sent a copy to Malacañan which focus on the core principles and objective of our tax reform, to wit:

“At its core, taxes must lift the lives of our people. It should not merely shift the tax burden from one to another especially for the poorest of the poor who do not benefit from lowering of tax rates as most of them are either minimum wage or unemployed.

Needless to say, a tax reform that burdens the poor is not a genuine tax reform at all, as they are supposed to be the ultimate beneficiaries of the taxes we pay. In fact, the government can unburden our people (especially small businesses) by passing the general tax amnesty. This is a necessary step in ensuring all taxpayers will be able to start fresh under the new tax regime.

We need to broaden our tax(payer) base, simplify further and automate tax compliance with lower tax rates to increase voluntary compliance. Congress needs to appropriate significant fund digitalizing tax administration to support tax policy reforms.

In our pursuit of a genuine tax reform, we must stop looking at the citizens (and corporations) as mere sources of revenue. The tax reform should always be tied to the ideal of relieving the burden on taxpayers. 

For the longest time, we are paying first world taxes, and getting third world services and benefits.” 

I know you have been working so hard, doing your very best to serve our country (our people) but it will never be enough to solve all our problems as we need everyone to do their share. Frustrating as it may seem, but too much taxes will further aggravate the situation, fuel corruption and discourage doing good (business) with the government. 

We need a tax reform which will account for the underground economy, empower the micro and small businesses, and encourage large taxpayers to pay fair (not onerous) taxes correctly since they contribute more than 60% of our revenue collections. 

A general tax amnesty with provision to lift bank secrecy will be very critical to jumpstart all these so we can send tax evaders to jail before they run in the next election. 

On March 27, the CREATE bill will lapse into law. Will you veto a provision in the proposed bill? If you are still contemplating on this, let me share with you some thoughts which will hopefully convince you to veto some provisions.

Here are the key features of the bill which I classified as either the best features which support our tax reform agenda, those with possible provisions to be vetoed and why, or other provisions which may have to be further studied and why: 

Best features 

  1. Immediate lowering of corporate income tax from 30% to 25% for large corporations effective July 1, 2021
  2. Lower taxes on non-profit hospitals and educational institutions. Proprietary educational institutions and hospitals which are non-profit will pay a corporate income tax rate of 1% instead of the current 10%, from July 1, 2021 to June 30, 2023
  3. More incentives for locating in disaster/conflict area. Registered enterprises that locate in areas recovering from disasters or conflict will be entitled to an additional 2 years of ITH
  4. VAT exemption for medicine
  5. VAT and duty-free importation of COVID-19 vaccines
  6. VAT-free importation and sale of COVID-19 medicines and PPE components up to December 2023
  7. Faster VAT refunds
  8. Better taxpayer experience with creditable withholding tax

With possible provisions to be vetoed

  1. Lowering corporate income tax from 30% to 20% for small and medium corporations (with net taxable income below P5M, and total assets below P100M)
  2. Lower taxes from small businesses exempt from VAT. Small businesses (sales under P3M) will pay 1% of gross sales instead of 3%, from July 1, 2021 to June 30, 2023

Comment: We should create a Tax Regime for Small Businesses which will impose a flat tax rate and simplified tax compliance for all small businesses whether registered as a sole proprietor or a corporation with threshold set not on total assets but on annual gross sales to include those in eCommerce business which may have less asset value but high gross revenues e.g., P100M ceiling at 10% flat tax based on gross in lieu of income and business taxes.

  1. Lower minimum corporate income tax. CREATE lowers the minimum corporate income tax (MCIT), typically charged against manufacturing corporations, from 2% to 1% from July 1, 2021 to June 30, 2023 

Comment: 2% MCIT is very low already especially for large taxpayers. 

  1. More incentives for relocation outside of NCR. Registered enterprises that fully relocate outside of NCR will be entitled to an additional 3 years of ITH

Comment: Limit the incentives to less urbanized and low-income municipalities to attract more employment and higher local taxes. 

  1. Higher VAT exemption threshold for sale of real property. VAT exemption threshold for socialized and low-cost housing raised to P2.5M, VAT exemption for house and lot raised to P4.2M

Comment: Not sure how and who will benefit here more, but definitely more exemption will further reduce tax collections 

For further study 

  1. Incentives for exporters and critical domestic enterprises. Up to 17 years of incentives for exporters and for ‘critical’ domestic enterprises, with 4-7 years of income tax holiday (ITH) and 10 years of special corporate income tax (SCIT). “Critical” industries will be defined by NEDA
  2. Incentives for domestic enterprises. Up to 12 years of incentives, with 4-7 years of ITH and 5 years of SCIT for enterprises with investment capital not less than P500M, and 5 years of enhanced deductions otherwise.
  3. Performance-based enhanced deductions. CREATE encourages job creation, value added, research and development, training, and the use of local materials with several performance- based enhanced deductions

Comments: As mentioned by Sen. Pia Cayetano, chair of the Senate Ways and Means Committee, the first bill on fiscal incentive rationalization was filed some 25 years ago. While I acknowledge the time and effort of our legislators and several experts who gave their recommendations, I honestly feel we need to study it further and pass a separate bill after CREATE to avoid any unintended consequences. 

Our comprehensive tax reform program must really make our tax system simpler, fairer and more efficient. While we laud the government efforts in pushing for tax reform, here’s a bucket list of urgent and much needed tax relief and reform to broaden our tax(payer) base and increase voluntary compliance especially from micro and small businesses:

  1. MARGINAL INCOME EARNERS. Increase sales threshold for marginal income earners from P100,000 to P500,000, and impose fixed tax from P1,000 to P5,000 based on location, target market and years of operations to encourage all sari-sari stores, online sellers and those in the underground economy. Let them pay annually or quarterly and provide online access where they can just encode their sales and purchases for easy monitoring;
  2. START UPS. Provide 2-year tax exemption to all startups but must not be affiliated to any existing corporations or conglomerates to avoid abuse and unnecessary tax benefit to those who can afford to pay taxes already;
  3. SMALL BUSINESSES. Standardize definition of a small business whether registered as sole proprietor or corporation, use sales as threshold (not asset value) e.g., P100 million and impose a flat tax e.g., 10% tax for small businesses in lieu of all other taxes i.e., income, businesses etc.;
  4. LARGE TAXPAYERS. Implement the lowering of corporate income tax from 30% to 25%, and allow them to use 20% but under Optional Standard Deduction (OSD) owing to the face that barely 5% if the effective tax rate being paid by most corporations;
  5. GENERAL TAX AMNESTY. Implement a general tax amnesty with provision on lifting of bank secrecy law for tax fraud cases. 

As our President, please make our taxes simple, fair and efficient to change the lives of our people for the better. Rest assured of my continuous support and unsolicited advices to push a genuine tax reform in our country where the rich and those who earn more will pay more taxes, while the poorest of the poor will be protected. 

About the Author

Mon Abrea, CPA, MBA is the Co-Chair of Paying Taxes – EODB Task Force. With TaxWhizPH mobile app as his brainchild, he was recognized as one of the Outstanding Young Persons of the World, an Asia CEO Young Leader awardee and one of the Ten Outstanding Young Men (TOYM) of the Philippines because of his tax advocacy and expertise. Currently, he is the Chairman and CEO of the Asian Consulting Group (ACG) and Trustee of the Center for Strategic Reforms of the Philippines – the advocacy partner of the Bureau of Internal Revenue (BIR), Department of Trade and Industry (DTI), and Anti-Red Tape Authority (ARTA) on ease of doing business and tax reform. Visit for more information or email him at and download TaxWhizPH app for free if you have tax questions.