The Department of Finance (DOF) is willing to lose its veto power in a proposed fiscal review board under TRAIN 2, a compromise “in the spirit of collegiality,” a top official said.
DOF Undersecretary Karl Chua said in a hearing on Tuesday that they were willing to let go of the veto power assigned to the finance secretary, which would have allowed the official to cancel or suspend incentives under the new tax rules.
This is the third time lawmakers in the House of Representatives deliberated on the second comprehensive tax reform package, a proposal pushed by DOF to cut the corporate income tax while rationalizing tax perks.
Under this proposal, the FIRB, which will be chaired by the finance secretary, will have the power to review and approve the tax incentives that will be given to companies.
While the board consists of top officials including the country’s economic managers, only the finance secretary has the veto power, noting that he or she is the “custodian of fiscal prudence and responsibility.”
“In the spirit of collegiality, the veto power is something we can let go, so that there will be more collegiality in the grant of incentives,” Chua said.
After the hearing, Chua told reporters that Finance Secretary Carlos Dominguez III was also “open” to the proposal, which otherwise would have given him the last say in granting perks.
Chua said this amid concerns flagged by the Philippine Economic Zone Authority (Peza), an investment promotion agency which risks losing its edge under the weight of the proposed tax reform.
Peza Director General Charito Plaza previously said that they were planning to propose an amendment to the Peza law, which will essentially let the Peza board keep on granting incentives without the approval of the FIRB.
Under the proposal, Peza will become a state-owned firm, breaking free from being an attached agency of the Department of Trade and Industry (DTI).
When asked in a previous interview for the value of becoming a state-owned firm, Plaza hinted at having less interference.
“It will be an attraction to investors, [saying] that there really is ease in doing business in the Philippines. This is because the more interference from different bodies and agencies, the more that investors will be discouraged,” she said.
Elmer San Pascual, manager of Peza’s promotion and public relations, said in the hearing that the FIRB “will defeat the very purpose of having a Peza board.”
He also noted that even the Peza board had a finance official among its members.