The Department of Finance is pushing for amendments to the Tax Incentives Management and Transparency Act (Timta) to mandate the reporting of all fiscal incentives under the proposed second tax reform package.
According to a DOF presentation, the second tax package covering corporate taxation is being eyed to be complemented by Timta amendments, one proposal under which is the inclusion of all tax incentives, whether investment or non-investment perks, when reporting or tracking them.
At present, reporting of foregone revenues from incentives covering value-added tax and local business taxes are not covered by the Timta Law.
A comprehensive review of the country’s tax incentives regime had been mandated under the Timta Law to give an overview of the benefits and the costs of giving away fiscal perks to investors.
Also, the DOF wanted to “include in the reporting all types of taxpayers, especially cooperatives.”
The DOF also wanted to “mandate the inclusion of all taxes in the computation of tax expenditure, including VAT and local taxes.”
The proposed amendments to the Timta Law will also allow submission of more “benefits” data, including those on investments (both actual and approved), employment, export sales, as well as research and development at the company level.
The DOF is also pushing that the Fiscal Incentives Review Board (FIRB) be empowered to conduct cost-benefit analysis in the future.
At present, the FIRB functions only to grant tax subsidies to state-run corporations and government offices.
Last month, Finance Undersecretary Karl Kendrick T. Chua said that 2015 data generated through the Timta Law showed that the government was losing more than P300 billion in revenue yearly from the wide array of tax and other perks being enjoyed by big corporations.
“Income tax holidays and special rates account for P86.25 billion of the revenue losses, while custom duty exemptions account for P18.4 billion. Exemptions from paying the value-added tax on imports led to P159.82 billion in foregone revenue, and local VAT, P36.96 billion,” Chua had said.