DTI pushes extension of income tax holiday

Trade Secretary Ramon Lopez  has urged the Department of Finance to consider extending the income tax holiday from the current four years, as part of the new administration’s thrust to “modernize” the fiscal incentive regime.

Doing so will help make the Philippines become more attractive to investors.

“It has been agreed in principle that the income tax holiday will remain as an incentive. But without putting out specific numbers, we could say that the government is considering to lengthen (the effectivity) of incentives in general. Maybe we can ask the DOF if we can extend the effectivity of income tax holiday as well—although this is where the DOF is very sensitive. We could say that other countries in the region even offer 10 years of income tax holiday while we (Philippines) offer     only four years, so maybe we can do something about this,” Lopez explained on the sidelines of a Negosyo Center launching ceremony on Tuesday.

According to Lopez, the proposed “modernized” regime targets to add new kinds of incentives and make these time-bound and performance based, as what was done for the Comprehensive Automotive Resurgence Strategy (CARS) Program.

These new incentives include tax deductibility on specific activities such as research and development as well as inclusive business; accelerated depreciation; and net operating loss carry over (Nolco). These incentives, which are not yet offered under the existing regime, can be tapped by companies registered with the Board of Incentives (BOI) once the effectivity of the income tax holiday lapses, Lopez explained.

“We said we were modernizing the incentive regime, which means we have to add more kinds of incentives. In principle, the DOF said they were okay with these. We (at the Department of Trade and Industry) and DOF also have the same position in terms of capping the period for the effectivity of incentives, such as those covered by the Philippine Economic Zone Authority. We can make these time-bound instead, say around 20 to 25 years,” he added.

The trade chief was quick to assure investors and businesses that the DTI will not change the rules midway and that the proposed modernization of the fiscal incentive regime will be prospective or will cover new applicants only.

The target, according to Lopez, is to come up with a joint proposal to be submitted to Congress in October or November this year.