While Americans were getting full on their Thanksgiving meals on Nov. 26, 2020, our partners at the Philippine Government’s Department of Finance were working to pass one of seven reform packages in the Comprehensive Tax Reform Program. The Philippine Senate passed the CREATE Bill (Corporate Recovery and Tax Incentives for Enterprises Act) after a 23-year battle to reform the corporate tax code. We spoke with Antonio Lambino, Managing Director for the Philippine Center for Communication and Investor Relations, and Lyonel Tanganco, a representative from the Strategy, Economics and Results Group, to discuss how stakeholder analysis and engagement covered in the curriculum of the World Bank-Annenberg Summer Institute (WBASI) helped them pass the long-awaited reform package in the Philippines. 

The CREATE Bill is one of the packages in the Comprehensive Tax Reform Program meant to reconstruct the economic plan for a fairer, more equitable tax system through time-bound and more transparent corporate tax policies. With more time-bound policies, the tax incentives would only be available to an enterprise for a set number of years (5, 7, 8 or 10) and must be renewed based on its performance during the incentive period, as opposed to past corporate tax incentive plans with unlimited tax incentives.

“Some of these companies have received incentives for around 40 years already, and the system in the Philippines, as of now, is usually not performance-based and not time-bound so some incentives are granted forever,” Tanganco said. “So if a company receives tax discounts and exemptions forever, what incentive do they have to become competitive?” 

The Senate passed the bill by a vote of 20-1, but it still has to go to the bicameral conference between the Philippine House of Representatives and the Senate before it can be signed into law by President Rodrigo Duterte. 

Lambino attended WBASI as a key founder and representative of the World Bank Institute. Knowing the importance of stakeholder engagement for reform efforts, Lambino stated, “The curriculum of the course(s) [in the World Bank-Annenberg Summer Institute] aligns with the way the [Philippine tax] reform works. I remember sitting down with the finance team for the packages and we did stakeholder mapping.” Stakeholder mapping was key to creating stakeholder-based approvable tax packages so that the tax program could be successful.

According to the Comprehensive Tax Reform Program’s website, the CREATE Bill will lower corporate income taxes from 30% to 20% by 2027 for micro, small and medium businesses that earn $100,000 USD or less per year. The stimulus is also meant to attract foreign investments and open more jobs in the under-resourced areas of the country. While many Philippine administrations have attempted to pass similar reforms, it was the unique packages in the Comprehensive Tax Reform Program that allowed it to address the needs of multiple stakeholder groups. 

After joining the reform team in 2019, Lyonel Tanganco was encouraged to apply for the World Bank-Annenberg Summer Institute, where he was able to find a grounding strategic framework applicable to his work in the Department of Finance.

“[Lambino] strongly recommended that I apply for the program,” Tanganco admitted. “A few months after the Summer Institute I was asked to lead Communications and Stakeholder Engagement for CREATE . Back then it was called the Corporate Income Tax and Incentives Reform App (CITIRA). The Summer Institute gave a good framework.” 

Tanganco also noted how the strategic communication framework, which was the “anchor for the whole program”, was useful in highlighting the CREATE stakeholders so we could align our communication objectives with the overall tax reform objectives.

“The framework starts with What is the organizational objective? For us, it was ‘pass the reform’,” Tanganco explained. “The next question is What would be the bit that the communications would contribute to? So, if the broad objective is to pass the reform, the communications objective would be to create an environment where the legislatures feel that there is public support for the reform. And so, we go through the whole process of who would influence the passage of the reform. So, you identify the stakeholders and then you assess them based on their influence and position currently and you identify the ones that really matter, the ones whose minds you have to change or whose position you have to strengthen, or perhaps you have to mobilize. For example, the micro, small and medium enterprises are the majority who will benefit, but a lot of them don’t know about the bill. So the intervention there is to unite them and make their voices heard by the legislatures. And for each of these stakeholders, we have the strategic framework, starting with What’s the behavior we want them to do?” 

A strategic communication framework was crucial for the Department of Finance reform team because it allowed them to analyze how each stakeholder group’s needs would be met in the Comprehensive Tax Reform Program. Using the framework, the team split the reform goals into different packages that would tackle the needs of specific groups. For example, the “Sin Tax” package addresses tobacco and alcohol users by raising the taxes on these products in order to also fund the universal healthcare law. The tax on the items keeps the stakeholders’ health in mind while also contributing to a program that will ensure healthcare access. The reform in the CREATE Bill is designed to grant incentives for corporations while updating the existing protocols with more accountability for fairer government spending. 

“The first half of the reform is pretty easy - it’s lowering taxes,” Tanganco admitted. “An overwhelming majority are supportive, and a few civil society organizations caution against rapid decreases in corporate income tax rates without accountability on the part of the businesses. The first half is very popular and that’s why we couple it to the second half of the reform, which is the fiscal incentives reform.” 

In order to meet the needs of multiple corporate groups, as well as the needs of the Philippino citizens, the reform program offers an incentive to each group. 

“What businesses need is infrastructure [and] an educated labor force. They need a healthy workforce - so these are things that the government also has to spend on,” Tanganco said. “You have to strike a balance. The idea of the second half of the reform is really to introduce accountability on the part of the companies.”

One of the reasons why the Senatorial passing of the CREATE Bill is so monumental is because it will attract investors to the underprivileged regions of the Philippines that are often not offered the financial resources to thrive. According to Tanganco, investors usually target metropolitan areas where the labor force is more concentrated. 

“Investors just flock to the metro because they get the same exemptions, the same discounts, so what incentives do they have to go outside and invest in the countryside, which is where we actually need more investments,” Tanganco stated. 

The strategic framework learned in the World Bank-Annenberg Summer Institute was important in determining how to earn the trust of different corporations, enterprises and policymakers and gain their support for the Comprehensive Tax Reform Program. The reform team conducted stakeholder mapping and identified whose perspectives were important for passing the reform. 

“There are actually 3,000 or so companies that are [currently] receiving tax perks. For most of them, if they just sit down and think about the reform and calculate their losses [and] the additional amounts they have to pay, they are still going to be productive,” Tanganco said. “So they're still going to be profitable, and we did those calculations based on the public financial statements they did as well.”

Nevertheless, while the reform team was working on gaining senatorial support for the CREATE Bill, the Coronavirus pandemic hit and the team set out to support the Department of Health with public communications work. 

“The first three weeks of the pandemic we were helping the DOH set up their communications team. I used some of the public comms work I used in Annenberg there,” stated Tanganco, who had recently attended the Summer Institute.

“We, of course, needed doctors and the officials of the health department to be out there in front of the cameras and to make sure they were updating the public regularly,” Lambino added. “We insisted on a daily briefing that was actually just done online, but a lot of the news agencies would pick it up live because people were hungry for information during the time but after a month or two, we went back to barracks to pick up the tax reform program that needed also to be advocated.”

Currently, the CREATE Bill is ready for a bicameral conference before it is adopted for presidential approval. Nevertheless, the work undergone by the reform team shows the power of communication frameworks when engaging various stakeholder groups for monumental change. 

The Coronavirus pandemic has made it extremely difficult to engage stakeholder groups around the globe. That is why our 9th annual World Bank-Annenberg Summer Institute will delve into strategic communication and stakeholder engagement during crises. If you are interested in reform and mobilizing stakeholder groups for real change, we look forward to you joining us at our World Bank-Annenberg Summer Institute.