Transparency in investors’ tax perks sought

The Department of Trade and Industry wants to further thresh out the details of the proposed rationalization of tax incentives as it sought to ensure better transparency in the accounting, reporting and granting of fiscal perks to investors.

Trade Secretary Gregory L. Domingo said this was needed, even as the DTI and the Department of Finance have already agreed in principle over the proposed measure which, if passed into law, is estimated to generate some P30 billion over a period of time.

Domingo noted that they would want to look specifically into certain provisions of the bill, particularly those that concern the implementation of the tax rationalization scheme. He, however, declined to provide further details amid ongoing discussions on the matter.

The DTI has since been pushing for the streamlining of the country’s incentive regime given the belief that the Philippines will become a more attractive investment destination if the government is able to cut down excessive corporate incentives and provide a more rationalized framework that would give risk-taking entrepreneurs a slight edge over established players.

Part of this thrust is the DTI’s aggressive push to repeal over 50 existing special Philippine laws granting fiscal and non-fiscal incentives to various industries, particularly those considered mature or dead, and have all the perks consolidated under the trade agency’s Investment Priorities Plan (IPP).

The IPP, which is crafted annually by the DTI-attached Board of Investments, identifies priority activities eligible for these incentives. It is the country’s blueprint for investment promotions and a platform to attract strategic investments with impact on countryside development and employment generation.

The DTI has long maintained that the IPP should be reinforced as a major tool in identifying which industries and activities should be eligible for incentives. The agency is undertaking a two-pronged approach to identifying which sectors should be given incentives.

The first phase identifies which are qualified for incentives, while the second phase tackles the incentive structure and processes, which would mean determining what incentives are to be given, how will these be administered and who should administer these.

Phase 1, according to the DTI, will “basically restore clarity, consistency and simplicity as the current regime created confusion among investors.”

Phase 2 meanwhile will review the necessity of the income tax holiday as an incentive and if there are other perks that could serve as alternatives.

The BOI currently grants about P17-billion worth of incentives to investors yearly.