As Congress nears passage of a measure that would lower corporate income tax and put sense into tax incentives, the Department of Finance (DOF) wants to take it a step further by also pushing for amendments to a law that required a listing of tax perks and revenue that the government waived through these incentives.
Finance Undersecretary Karl Kendrick T. Chua, considered the brains of the ongoing tax reform effort, said the DOF wanted the Tax Incentives Management and Transparency Act (Timta) amended to more accurately reflect revenue waived by the government through tax incentives given to businesses.
Chua said while he preferred that amendments to Timta be made part of the proposed Corporate Income Tax and Incentives Rationalization Act (Citira), “it can be separate.” “In our proposal, they’re together,” he said.
While the House version of Citira excluded amendments to Timta, Chua said “we are adding it to the Senate bill.”
At least week’s Senate finance committee hearing on the DOF’s proposed 2020 budget, Senate Minority Leader Franklin Drilon expressed interest in sponsoring amendments to Timta.
Chua said it was up to the opposition senator. “He can do it stand alone or together. Ideally, Citira and Timta amendments should go together,” Chua said.
Chua said he hoped both Citira and Timta amendments would be passed this year.
Timta was enacted in 2015 and aimed at better monitoring of fiscal perks being given to investors and measuring their contribution to the economy. It seeks to ensure that revenues waived through incentives redound to economic benefits.
But Chua last week said Timta, as it is, does not allow the National Economic and Development Authority (Neda) to capture all data on waived revenue from tax incentives despite mandated reporting by investment promotion agencies.
Chua said data on incentives should be available per company not just per industry because under the terms of Timta, “we cannot do a proper cost-benefit analysis.”
Amendments should also assure “full transparency,” said Chua. Data submitted on tax perks goes to the Bureau of Internal Revenue where these become confidential matters which Neda can’t touch. “We can do it but we are blind with the names (of companies enjoying tax perks),” Chua said.
A DOF presentation last year showed that among Timta amendments being sought was inclusion of all tax incentives, whether investment or non-investment perks, in reporting or tracking these.
Timta does not currently cover reporting waived revenue from incentives covered by Value Added Tax and local business taxes.
The DOF also wanted to include in reporting “all types of taxpayers, especially cooperatives.”
Amendments also seek to empower the Fiscal Incentives Review Board, which currently just approves tax subsidies to state-run firms and government offices, to conduct cost-benefit studies of private tax perks./TSB