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In a move that could accelerate the country’s digital transformation, the Philippine government has created the CREATE (Corporate Recovery and Tax Incentives for Enterprises) Act which offers generous tax incentives for investments in new digital technologies.

The move was recently confirmed by Department of Commerce and Industry (DTI) Undersecretary Rafaelita Aldaba speaking at a forum of the European Chamber of Commerce of the Philippines (ECCP). She revealed that the CREATE Act is aligned with the agency’s industrial policy by promoting investments that will push for a fourth industrial revolution.

The CREATE law (Corporate Recovery and Tax Incentives Act) provides support measures for innovative projects that companies can access as part of the implementation of their industrial transformation plans.

– Rafaelita Aldaba, DTI Undersecretary

Additionally, Aldaba stressed that new technology investments are the government’s top priority. Within the framework of the CREATE law, level 3 activities are attributed:

  • longest tax holiday period (ITH)
  • Special corporate income tax (SCIT) of 5% for exporting companies
  • and enhanced deductions.

Additionally, she explained what categorizes Tier 3 investments. These include:

  • Industries adopting the advanced digital production technologies of the fourth industrial revolution
  • Industries producing equipment, parts and services integrating new technologies
  • Industries engaged in research and development (R&D) activities and the commercialization of R&D that lead to accelerating innovation and “increasing the added value of products and services”.

These include investments in robotics, industrial biotechnology, additive manufacturing, photonics, advanced materials, nanotechnology, advanced manufacturing, artificial intelligence (AI), mobility, blockchain, cybersecurity , satellite technology, big data, Internet of Things (IoT), augmented and virtual. reality, micro and nanoelectronics and cognitive technologies.

The benefits of leaning into emerging technologies are many. For example, exporting companies that will invest in Tier 3 investments in Metro Manila qualify for six years of ITH and seven years for investments outside of Metro Manila, and another 10 years of enhanced deductions and SCIT.

But it’s not just exporters, local businesses can also make the most of the CREATE Act for more years for enhanced deductions and SCIT.

Aldaba highlighted the importance of new technologies in today’s world. This requires a paradigm shift. She cited AI, for example, as not being there to destroy jobs or replace humans, but to create new jobs and change the look of work, increase human intelligence and skills, and make our safer workplaces.

Although she revealed that the reality is that micro industries have the lowest technology usage scores, the paradigm shift is expected to happen even for the smallest businesses. Small and medium-sized enterprises (SMEs) should use new technologies to improve their functioning.

The Philippines is increasingly moving towards greater digital transformation. This recent move bears witness to this. And time and time again, the Southeast Asian nation has relied on technology to drive its economy forward. As reported on OpenGov Asia, Manila has sought the partnership of the biggest names in tech today to facilitate a successful, clean and fair national election on May 9.

Although there is still a long way to go for the country to embrace digital technology, the CREATE Act should provide a timely spark to ignite positive change for every Filipino.

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