Flexible incentives scheme pushed
Finance Secretary Carlos G. Dominguez III INQUIRER File Photo
The Department of Finance (DOF) is seeking to give the President a direct hand in the granting of “suitable” fiscal incentives to investors in a bid to attract more investments amid the COVID-19 crisis.
During a meeting of the Inter-Agency Task Force on Emerging Infectious Diseases (IATF-EID) aired over PTV-4 on Tuesday, Finance Secretary Carlos G. Dominguez III urged legislators to pass the pending Corporate Income Tax and Incentives Reform Act (Citira) before Congress goes on break on June 3.
The bill had already been passed by the Lower House, but it remained pending in the Senate amid concerns by some senators that investors might flee the country when the tax perks they enjoy are reduced, hence result in job losses.
Citira is aimed at rationalizing tax incentives that result in foregone government revenues, while gradually reducing the income tax rate slapped on businesses to 20 percent from 30 percent at present—the highest in Asean.
Last week, Dominguez said that the DOF was open to slashing corporate income tax rates “more quickly than originally planned” through Citira.
On Tuesday, Dominguez said that Citira would now “include flexible tax and nontax incentives so we can target specific companies that we want to invest here.”
Asked to elaborate, Dominguez replied: “Flexibility refers to mechanisms that will allow the government to tailor-fit incentives—fiscal and nonfiscal—to specific investors whose relocation to the Philippines can yield significant economic returns for the country. Benefits would include good jobs for our workers and co-location of key players in cutting-edge industries.”
“One of the structural problems of our current system is the limited room for the kind of negotiations that our neighbors are having to attract potential investors. Our menu of incentives should not be a one-size-fits-all approach. There are potential investments that are uniquely deserving of incentives for reasons that serve the public interest, but their needs do not fit the kind of incentives specified in our laws,” Dominguez noted.
Under the original Citira proposal, the President can extend the duration of incentives upon the recommendation of the Fiscal Incentives Review Board (FIRB). Dominguez said enhancements under a more COVID-19-responsive version of the bill could include the power of the President, upon recommendation of the FIRB, to grant a mix of incentives that better suit an investor’s unique needs.
At present, the DOF-chaired board only grants tax subsidies to state-run corporations, but Citira will empower the FIRB to green-light investors’ tax perks as well as make it the oversight body for the 13 investment promotion agencies (IPAs) giving away fiscal incentives.
“We are already exploring this proposal with relevant committees and leaders of Congress. That would make the system more responsive to investments that will serve our people well,” Dominguez said.
Dominguez had said that Citira could also serve as a stimulus to a postpandemic economy as it would attract more investments and generate jobs.INQ
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