DTI keeps current IPP, pushes back major changes to 2014

The Department of Trade and Industry (DTI) is retaining the 2012 Investment Priorities Plan (IPP) for 2013 with minor changes, and will likely reserve major adjustments for 2014.

Around July, DTI will have passed the IPP to the Office of the President for review, Trade undersecretary Adrian Cristobal told reporters.

Among the “minor changes” are definitions on which hospitals can seek incentives and the incorporation of recent investment rules on the removal of tax holidays for tourism accommodations in 4 major destinations (Metro Manila, Cebu City, Mactan Island, Boracay Island).

Trade secretary Gregory L. Domingo earlier said the DTI preferred to just keep the current investments list for 2013 so that it could work right away on a new list for the 2014 IPP, which it aims to pass at the end of 2013.

The DTI, Domingo said, wants to issue the 2014 IPP early to better guide investors.

Major changes in the next version of the IPP may address major issues like mass housing, he added.

Fiscal authorities are pushing for a more targeted incentives scheme. The Department of Finance (DOF) wants mass housing removed since it has been included in the IPP for a decade now. Investors are the only ones seen to benefit from the perks. The DOF is also keen to remove “mainstay” sectors such as shipbuilding, iron and steel, and motor vehicle manufacturing from the 2013 IPP.

In a position paper sent to Trade undersecretary and BOI managing head Adrian S. Cristobal Jr., Finance undersecretary Jeremias N. Paul Jr. said, “subsidizing projects that do not need tax incentives should be avoided because they represent wastage of government resources.”

A copy of the letter shows that the DOF wants to limit the 2013 IPP to export-oriented investments (such as creative industries, knowledge-based services, medical tourism), qualified micro and small enterprises (such as agribusiness and fishery), as well as research and development activities (such as green technology and laboratories for clinical trials).

The DOF gave “conditional support” to strategic projects that may be jointly identified as such by the DTI, DOF and the National Economic and Development Authority.

As for infrastructure, energy, and public-private partnership projects, these have cost recovery mechanisms even without tax incentives, according to the DOF’s position. Renewables and biofuel projects, meanwhile, are covered by special laws.

Likewise, Paul said, “mandatory listing on the IPP should be closely monitored, pending omnibus reform of the entire fiscal incentive system of the Philippines. Safeguards provisions should be put in place to ensure the proper implementation of tax incentives.”