Perks for ‘high tech’ investments eyed

While the Department of Finance moves to reduce the tax incentives being given away to investors, the government is considering granting perks to “high-tech” ventures, the head of the Duterte administration’s economic team said.

“We will craft an incentives program that will attract high-tech sunrise industries such as robotics design and manufacture, industries in space technology such as satellites, as well as advanced health care with focus on geriatric care,” Finance Secretary Carlos G. Dominguez III said in a text message to reporters Saturday.

Under the DOF’s proposed second tax reform package covering corporate income taxes, the reduction in rates will be dependent on the revenue gains once the government consolidates existing laws that extend fiscal and other incentives.

Based on DOF presentations before industry associations, the second package aims to broaden the tax base by repealing 150 special laws on investment tax incentives and consolidating them into a single omnibus law.

It will likewise repeal tax exemptions of government-owned and/or controlled corporations, proprietary educational institutions and hospitals, regional headquarters, regional operating headquarters, incomes of resident foreign corporations from foreign currency transactions, nonresident cinematographic film owners, lessors or distributors, and owners or lessors of aircraft, machinery, vessels and other equipment.

While cutting incentives, the second tax reform package will bring down corporate income tax rate starting Jan. 1, 2020 by 1 percentage point for every reduction in investment tax perks, which were estimated to amount to 0.15 percent of gross domestic product in 2018 or about P26 billion.

“The goal is to reduce the corporate income tax rate from 30 percent to 25 percent by 2022, while expanding the [corporate tax] base by 0.75 percent of GDP or P130 billion in 2018 prices,” according to the DOF.

Another provision in the second tax reform package is the holding of a regular review by the Fiscal Incentives Review Board of all tax and other perks extended by various investment promotions agencies (IPAs).