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DOF hopes to plug tax leak with House measure

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The Department of Finance said the latest fiscal incentives rationalization bill filed in Congress, if enacted into law, would pave the way for an era of reform that would address the wastage of potential government revenues.

In a statement, Finance Secretary Cesar Purisima reiterated the DOF’s support for the rationalization of the way incentives were being granted to businesses. The measure is aimed at plugging revenue leakage brought about by the careless granting of tax- and duty-free privileges.

“This bill will help us trim waste from government spending and will help us free up fiscal space to invest in our people and our infrastructure,” Purisima said on Monday.

Under House Bill No. 2765 filed recently, government agencies extending fiscal incentives to businesses and industries would be required to specify the proposed amount of tax- and duty-free privileges they intend to extend. Also, they will be required to state the objectives of the perks.

Incentives that have not yielded the stated objectives by the end of the given period would be subject for removal.

“This [bill] will make it easier for us to discontinue incentives that are either misaligned with our goals or are given to industries that are already mature. Likewise, this bill will help us identify which sectors use incentives most effectively in bringing benefits to the Filipino people,” Purisima said.

The latest fiscal incentives rationalization bill, filed by Rep. Luigi Quisumbing of the 6th district of Cebu, was in line with the DOF’s position seeking the removal of tax- and duty-free privileges that were deemed “redundant.” Finance officials said such a proposal had been languishing in Congress for about 15 years now.

Purisima said the Congress should give due attention to the bill this time to curb substantial foregone revenues for the government.

According to the Bureau of Internal Revenue, the fiscal incentives rationalization bill, if implemented, may help the government generate about P19 billion in additional revenue a year.

Revenue Commissioner Kim Henares said there were too many unnecessary incentives. These include those granted to businesses that would have invested in the country and would have been profitable even without the tax breaks.

Henares earlier cited the housing development sector as an example. She said real estate developers should not be granted fiscal incentives. If the government wants housing to be afforded by the masses, Henares said, it would be better to grant direct cash housing subsidies to the poor.

The BIR chief said that following the Sin Tax Reform bill, which was enacted into law in January, the fiscal incentives rationalization bill would again test the ability of Congress to pass a measure that was expected to face stiff opposition.

The Sin Tax Reform bill, which raised the taxes on cigarettes and alcoholic beverages, also took about 15 years before it was finally enacted into law, Henares said.


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Tags: Business , Department of Finance , tax leak

  • Hayek_sa_Maynila

    Yeah! Its about time we do this. We don’t need these sweeteners to attract investments. Our poor FDI numbers in the last 30 years prove these incentives were not relevant.

    This is just like pork barrel…politicians decide to give away resources in “favored industries instead of pouring them into more important priority programs of government.

    Fiscal incentives become sizeable loopholes for tax evaders. Better get rid of them and use the saved money for infrastructure, a more critical factor for deciding to invest in the PHL or elswwhere.

  • RealityCheckX

    That’s right, Quisumbing, Henares and Purisima. Show all and sundry how arbitrary and capricious this government is, changing regulatory policy in mid-stream. No wonder foreign direct investment continues to lag behind other ASEAN countries. Your magical GNP growth figures are not sustainable since they depend on remittances and consumption, themselves inflationary.



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