Finance Secretary Cesar Purisima. FILE PHOTO
The Aquino administration will honor all unexpired tax- and duty-free incentives being enjoyed by the private sector, according to Finance Secretary Cesar Purisima.
The statement allayed the concerns of the business community over government efforts to rationalize fiscal incentives as Purisima said that contrary to worries by some businessmen that the government wanted to “change rules in the middle of the game,” the implementation of the proposed rationalization of fiscal incentives would be prospective.
The Department of Finance (DOF) is not pushing for an immediate withdrawal of fiscal incentives granted under existing agreements, the finance chief stressed.
“We will not change the rules in the middle of the game. Any change we are proposing will be prospective and existing arrangements will be respected,” Purisima told the Inquirer on Friday.
Purisima was reacting to concerns from the business sector that a sudden change in the fiscal environment could disrupt operations of those currently enjoying tax- and duty-free privileges.
Under the latest version of the DOF-backed fiscal incentives rationalization bill, filed by Rep. Luigi Quisumbing, all incentives currently enjoyed by enterprises will continue either until the agreed expiration date or for four more years starting from the date the bill is enacted into law, whichever is earlier.
The DOF said it believed that four years of fiscal incentives should be enough to help a promising enterprise become viable.
It said the need to attract investors should be balanced by the need to rationalize tax- and duty-free privileges. Rationalization was necessary both to shore up state revenues and to make the country’s tax structure equitable, it said.
The DOF said incentives should no longer be given to companies and industries that were already profitable and viable even without the tax- and duty-free perks.
Under the fiscal incentives rationalization bill, income tax holidays will be good only for five years and will be given only to export-oriented firms and enterprises engaged in “strategic” industries.
A firm may be considered “export oriented” if at least 70 percent of its annual production is for export.
“Strategic industries” are those that the government, through the Board of Investments, deems as a priority. The list of strategic industries is revisited for possible amendment every three years.
The government estimates to generate P19 billion in additional revenues a year should the bill be enacted into law. The proposal to rationalize fiscal incentives has been languishing in Congress for 15 years.
The DOF, however, said there was a stronger push now to have the bill passed before the Aquino administration ends its term in 2016. The DOF actually hopes to get the bill passed in the current 16th Congress.