Aquino administration renews fiscal incentives rationalization


With the enactment of the sin tax reform and reproductive health measures into law, the Aquino administration now wants legislators to pass in the coming 16th Congress another controversial bill that has been pending for 15 years.

The fiscal incentives rationalization bill has been facing strong opposition due to its provisions, particularly the lifting of the tax- and duty-free incentives of several industries.

“The reproductive health and sin tax reform laws were 15 years in the making. Now, we are hoping Congress [will] finally pass the fiscal incentives rationalization bill that has also been pending for about 15 years,” Internal Revenue Commissioner Kim Henares said last week.

The bill has been certified a priority measure by the Aquino administration’s economic team. Finance Secretary Cesar Purisima earlier said that the tax perks granted to industries that could stay viable even without the incentives should be lifted to boost government revenues.

Two of the industries that should no longer be granted income tax holidays are low-cost housing development and mining exploration, Henares told the Inquirer.

Henares said that, according to the law, a low-cost house is one that is priced at P3 million and below. Based on the hefty price tag, the houses should not be considered “low-cost” and developers should not be entitled to incentives, she explained, citing the government’s potential revenue loss.

“Why give incentives to the developer? A better measure is to give subsidies directly to the poor,” she suggested.

On mining, Henares said the government should no longer grant income tax holidays to companies engaged in exploration. She said the country’s rich natural resources are incentive enough, and mining companies in the Philippines can stay profitable even without the tax perks.

The BIR and its head agency, the Department of Finance, said the tax incentives granted to various industries continued to weigh down the country’s tax effort.

A closely watched indicator of a country’s credit worthiness, tax effort is the ratio between the government’s collection of taxes and import duties and the economy’s gross domestic product.

Ideally, growth in tax collection should at least match the economic growth pace. However, this is not the case in the Philippines because many profitable industries do not pay the proper taxes to the government, Henares said.

The DOF earlier reported that the tax effort stood at 11.9 percent in the first quarter, down from the 12.5 percent reported in the same period last year. The Philippines’ tax effort is lower than those of many countries with similar credit ratings.

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  • Ako_Hiking

    And what about the FOI Bill? Presidnet Aquino gives all this talk about corruption against the previous Administration but yet he doesn’t seem to fully a bill that fosters good governance by providing transparency in government transactions? There was more transparency in the GMA Administration this this current one.

    • mojo76

      wow more transparency from GMA,if you think we have more of that then why they never pass the bill of RH,SIN TAX Law,this FOI in the 1st place.

      • Ako_Hiking

        What are you talking about? The RH and Sin Tax Bill is different from the FOI. Do you know what FOI stands for? Do you know what it is for? It is to provide transparency and accountability and thus fosters good governance. The fact that Aquino doesn’t seem to fully support that says something about his Administration.

      • mojo76

        i know what im talkng about,if you think GMA is more transparent this FOI bill your talking should been pass by in her term.. got it……dont talk about GMA have more transparency that this government coz your wrong.

      • Ako_Hiking

        GMA’s term has actually been more transparent than this current Administration. She did a lot of good for the country and was very transparent which also caused a lot of scrutiny because when you do so much you will always offend people since everyone wants to be part of the projects and when one is not involved they of course get jealous and thus attacks ensues.

      • mojo76

        transparent in what way….to be fair yes she do something but as a whole country she failed big time,it will take me long time just to give you those anomalous and scandal she been linked to. so pls saying the word transparent in her term is a joke.

      • Ako_Hiking

        All the anomalous and scandals that you are alluding to are all baseless allegations that hold no water. And on top of that the fact that these projects under her can be scrutinized proves that there was transparency. There are always corrupt people in any Administration including Aquino’s. So if you are blaming Gloria for certain corruption then you should blame Aquino as well.

      • mojo76

        what do you expect they try to hide everything and hired lot of talented and greedy lawyer just to tell them about technicalities in every case money they can spend and of course trapos in politics that waiting for another persona like arroyo for another good old days in the philippine for them to enrich themself…..might remember they controlled the Supreme Court before that everything move slowly and nothing really done right… dont lecture me about arroyo accomplishement from 2 term which is pathetic and full of conaivance,corruption and anomalies.

      • Ako_Hiking

        If you are willing to comment then you are subject to lectures. As much as you may hate to admit it, Gloria did a lot of good for the Philippines and their economy…FITCH, S&P, and the IMF have all already commended Gloria and her Administration. Corruption has plagued every Administration including this current one…the only difference is people now are being blind to it.

  • eight_log

    The best incentive this present government can give to everybody is a LEVEL PLAYING FIELD … if Pnoy was really serious when he mentioned that during the campaign period!!!!!!

  • Weder-Weder Lang

    Lower the income tax for fixed income earners. That’s the best trickle-down approach.

  • pilipino

    I am a real estate developer and my company is a member of SHDA, we sell our townhouse units at P1.4M-P2.4M and P2.5M-P3M for our single attached units. Almost all of our projects would qualify for BOI Incentives for we are very much within the specified criteria in the IPP (Investment Priority Plan) but we never attempted to apply nor avail of such because we know that it is actually just taking advantage of that scheme to make more money (profits). And developers are not known in passing to the buyers the supposed savings in taxes due to the income tax holiday.

    DMCI Homes and PHINMA Homes are known for low selling price per floor area compared with the other developers who are into “low-cost” condominium development, but this is not because of the tax savings being passed on to the buyers but this is more on due to their cost-saving (materials & labor-wise) construction system so that they can even finish one floor in a week.

    In fact some developers are very much into ‘fooling around’ with the BOI Incentive scheme, they pre-sell the proposed project (vertical or horizontal) under a 20%-30% downpayment scheme over 12-15-18 months at 0% interest, and then when they have pre-sold 60% of the proposed project that;s the time that they apply for BOI Accreditation to buy time because the ITH (Income Tax Holiday) is usually good for 3-5 years. But the fact is this scheme supposedly disqualifies one from availing it because the criteria requires that there should be no sale yet, including reservation, prior to application for accreditation.

    Para makalusot, ang ginagawa nila is they retain 10% of the required 20-30% downpayment so they will not be forced to execute the Contract To Sell which should be executed upon receipt of Full Downpayment, and they record the downpayment for the sale merely as ‘earnest deposit’ from other parties. The retention amount does the trick because officially there is no sale yet, and that makes the proposed project qualify for BOI Accreditation and ITH incentives.

    I can name some developers who are into this because as SHDA members we compare notes on how we do things.

    • Juan Dela Cruz

      this is valuable insider info. so tax savings are not passed on to buyers. but does it at least entice more developers to go into low cost housing? or do we have enough laws anyway to effectively force a developer to go into low cost/mass housing?

      • pilipino

        A lot of developers are enticed into low-cost housing already, in fact even Ayala got into it thru their AVIDA and AMAIA group. That’s the good part here.

        But what I don’t like is the govt giving tax incentive to housing projects being sold up to P3M. You might not believe this but I had a project in southern metro manila (I won’t specify the project, else you can identify me), the townhouses used to sell at P1.38M but when there was strong demand I stopped selling for a while and introduced minor aesthetics to make it look like pangmayaman and then resumed selling but at a high price of P2.88M, but the cost of added material specifications like synthetic granite floor finish and real granite countertop was only about P100T per unit but my additional patong was P1.5M which is actually an added income already. Just imagine if I availed of the tax incentive because that is very much within the P3M bracket.

        And the buyers would never have any idea that they paid me P1.5M additional for a mere P100T++ worth of improvements in the looks or “dating” of the unit.

        You see, it’s really “unfair” to the government. At least I am not unfair to my buyers because I never availed of this ITH scheme, and in business we have the leeway to maximize our profits up to the point that the market is willing to absorb. And any profit gained after tax goes back to the acquisition and development of more properties to address the needs of the market.

        There is still patriotism in me that’s why I don’t like some business people “fooling” the government in terms of proper taxation.

        I still am able to make more money despite paying the right taxes. If Filipinos don’t pay their taxes correctly and timely, then the government will always go to banks as source of financing for govt infra projects and welfare services.

        Case in point: We complain of the dilapidated NAIA 1 Terminal or bad roads and bad seaports but did we support these projects financially thru our taxes? If the govt borrows money all the time, that will translate to higher interest rates which is bad for business and bad for everybody, and the worst part is if govt will borrow money again just to pay for the interests of the previous loans – that in itself is a counterproductive cycle.

        But anyway, what I favor is the Income Tax Holiday for those developers who are really into helping the lower economic bracket of our society – those housing projects that sell between P400T-P1.5M really deserve to get such subsidy via tax exemption. Because they only make around P80T-P350T taxable income from such kind of projects at konting taas lang ng presyo ng semento, bakal, yero at fibercement ay pwede na nilang ikalugi agad.

        Businessmen who are into this are the real heroes in real estate development industry, and they are mostly members of OSHDP (Organization of Socialized Housing Developers of the Philippines). I say Mabuhay! to them, they are helping the Filipinos realize their dreams for a decent house, and they do this ministry in the provinces. Sila ang dapat matulungan ng gobyerno para mas lalo pa silang makapagbigay katuparan na magkabahay ang karamihan sa ating lipunan.

      • aspirin200

        I salute you sir. Nice to know that there are still honest people engaged in low cost housing development unlike many in the provinces that simply crams newspaper in hollow bock cavities and slap plaster to hide all sort of substandard work.

      • eight_log

        a 1.5M house a low-cost house????? I am sure out of 1.5M paid by the customer, actual construction cost is less than 700K.!!!!!! TAX HOLIDAYS MUST BE GIVEN ONLY TO START-UP ENTREPRENEURS WITH VERY LIMITED CAPITALIZATION!!!!

      • pilipino

        P1.5M is low-cost to me. The P700K is only good for the house construction, what about the cost of land and the cost of land development, including the 35% of land area that you throw away for roads and open spaces, and what about the cost of the project amenities like the guard house, the clubhouse, basketball court and parks and playgrounds which are by the way required by law to be part of the development. And what about the money spent for underground drainage and water lines and the elevated water tank, and how about the Meralco lines? All these add up to your cost of sales.

        If you consider all these, you will realize how small the margin that businesspeople get from this market bracket, that’s why I call it a ministry and not merely a business enterprise. Those selling P1.5M and below ay dapat talagang tulungan ng gobyerno, maliit man o malaki sila, kasisimula pa man lang o matagal na sa ganitong larangan.

        At minsan naiipit pa yung collection nila from Pag-IBIG dahil nagtatagal ang release ng individual Titles sa Registry of Deeds, iniipit ng mga kurap na taga RD dahil walang panglagay dahil masyado na ngang manipis ang kita, isang bahing lang ng economy pwedeng malugi na agad. Kawawa na nga sila, kinakawawa pa ng mga taong-gobyerno din. RD people should shape up, huwag nyong hintayin na pakialaman pa kayo ni PNoy.

        SHDA and OSHDP have already complained about this malpractice in RD.

      • aspirin200

        Right, my partners and I bought a small property and which mother title needs to be broken up so one can be issued to us. Its been 14 months now and when you make a follow up, the RD office will just say, “sorry, nasa Manila pa”. This has become bloody unacceptable.

      • pilipino

        You google search “ForeclosePropertiesNgPinoy” and they are number 1 on the list, most of them are my friends and partners in business. Real estate is an interesting world, you will definitely enjoy it. There are many online resources to learn from, tyagain mo lang mag search online.

      • Juan Dela Cruz

        again, thanks for sharing these info, especially those clueless about the housing sector. if I’m in the market for a house & lot, what websites/resource materials, or even seminars/training, can you recommend to help me get info/skills to look for the best deals? hearing what you said, i’m more inclined now to look for foreclosed units, lots only, etc. instead of looking at what real estate developers are offering.

  • isangbansa

    “Why give incentives to the developer? A better measure is to give subsidies directly to the poor,”

    fully agree.

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