DTI pessimistic on passage of incentives bill
MANILA, Philippines–The chances of having a rationalized fiscal incentive regime within the term of the Aquino administration are getting dim unless the proposed bill is passed within this year, according to Trade Secretary Gregory L. Domingo.
But the proposed fiscal rationalization bill, which has yet to be submitted to the Senate and the House of Representatives, is still being completed by the departments of finance and of trade and industry. This gives both the Senate and the House limited time to pass it before President Aquino ends his term in 2016.
Domingo reiterated that both agencies have already come to terms on the proposal and were merely ironing out minor details. He wax also optimistic that they would no longer face any difficulties in the version being finalized by the DOF, adding that “this is the closest [both agencies have] agreed to in the past 20 years.”
The trade chief stressed anew the benefits of the new fiscal rationalization scheme they were proposing as “this will be a big improvement in the current way we do things.”
Under the proposal of the DTI and DOF, enterprises registered with the Board of Investments would be entitled to a 15-percent income tax for 15 years.
Those registered with the Philippine Economic Zone Authority would be entitled to income tax holiday for only four years, after which they have to choose from two options, the first of which would be 5-percent tax on gross income earned (GIE) in lieu of all national and local taxes, while the second option would be a 15-percent income tax for 15 years. Peza incentives can be renewed upon the discretion of the Peza board of directors.
Effectively, a cap will be implemented only for BOI enterprises while Peza locators can enjoy continuous perks provided they get approvals from the Peza board.
As for the Tax Incentives Management and Transparency Act (Timta), Domingo said they were hopeful that Congress would be able to come to terms on the provisions under their respective versions.
“The Senate and House have different versions of Timta. But the House will have a technical hearing this Tuesday and hopefully they can come up with the same version as that of the Senate. [The bottomline] is that everybody is in agreement toward transparency and disclosure of information with regards to the incentives that are being granted, and the benefits we get from these incentives,” Domingo added.
One of the most pressing differences between Senate Bill No. 2669 and House Bill 2942 is the proposed appropriation of incentives. The Senate version provides that incentives will not be appropriated or budgeted, which means that the granting of incentives will not need congressional approval. The monitoring of tax incentives will be through with the creation of the Tax Incentives Information section in the annual Budget of Expenditures and Sources of Financing, which will only serve as an addendum to the national budget.
However, House Bill 2942, or Timta, has a provision that called for the creation of a tax expenditure account, from which the tax incentives being granted by investment-promotion agencies are to be provided.
