A cut in the effective corporate income tax rate to 20% from 25% could boost our earnings per share (EPS) forecast by around 3% but impact will vary per sector\/stock. Thus, we add this to the list of positive catalysts that should help propel the market towards our PSE index (PSEi) target of 7,500<\/a>.<\/p>\n\n\n\n The Senate passed the CREATE MORE bill which aims to stimulate economic recovery by reducing the corporate income tax (CIT) rates to 20% from 25% for both local and international companies. <\/p>\n\n\n\n The bill also seeks to eliminate the value-added tax (VAT) on essential services and allow large domestic enterprises to receive a VAT zero rating, exemption and duty exemptions. The next step is for the President to sign the approved bill into law.<\/p>\n\n\n\n Under the bill, large, registered business enterprises (RBEs) with a capital stock of over P20 billion will be granted value-added tax (VAT) zero-rating on local purchases made and VAT exemption on imports and duty exemptions on imports of capital equipment, raw materials, spare parts and accessories.<\/p>\n\n\n\n Export-oriented RBEs are also entitled to VAT zero-rating on essential services such as janitorial, security, financial consultancy, marketing and human resources, based on a copy of the bill.<\/p>\n\n\n\n CREATE MORE should boost corporate earnings, mainly the Consumer and Telcos, which are still paying close to the statutory tax rate of 25%. Property developers could also benefit as tax exemptions on imports of capital equipment and raw materials translate to lower costs and higher margins. The impact on Banks and Power sectors will be more limited given that these sectors already enjoy some preferential\/lower tax rates.<\/p>\n\n\n\n At 20% corporate tax rate, the Phils will now be below the 23% average across ASEAN (from being the highest before). The reduction will be applied retroactively from July 2020. Thus, CREATE MORE is expected to create more attractive investment environment (entice foreign direct investment) and foster local industry growth.<\/p>\n\n\n\nAnalysis<\/h3>\n\n\n\n