DOF seeks lifting of fiscal perks to save P300B a year

The Department of Finance (DOF) is asking Congress to lift the fiscal incentives of airline companies and 36 other public and private corporations that cost the government at least P300 billion annually.

Finance officials said the government’s complex incentives system has resulted in revenue losses equivalent to 6.97 percent of the country’s gross domestic product (GDP), an amount more than enough to wipe out the entire budget deficit.

With ample backing from the International Monetary Fund (IMF), the DOF is pushing for the repeal of at least 40 special laws that granted these incentives in order to recover revenues of up to P12.27 billion a year.

The first sweep would remove the tariff exemptions on imported aircraft fuel currently enjoyed by Philippine Airlines (PAL), Cebu Air, Pacific Airways, Air Philippines and Aboitiz Shipping.

The remaining 36 laws would affect mostly government-owned and controlled corporations (GOCCs) including Philippine Amusement and Gaming Corp., Philippine Ports Authority (PPA) and the country’s national museums.

Special interest groups would also lose their fiscal perks once Congress amends the incentives provisions in such laws as the Campus Journalism Act, Science Act of 1958 and even such programs as the Promotion of Breastfeeding and Providing Rooming-in Facilities in Hospitals under Republic Act 7600.

Finance Undersecretary Gil Beltran told reporters that the DOF wanted to clean up the proliferation of fiscal incentives law, most of which were no longer relevant or justifiable.

At present, Beltran said the incentives system loses a total of P299.924 billion a year

Beltran said the system of providing incentive packages under various special laws was overloaded with policy objectives that were difficult if not impossible to track.

According to a presentation made by the DOF to Congress, the biggest drain was from various exemptions to the value-added tax amounting to foregone revenues of over P195 billion a year.

Beltran said the incentives granted under the major investment incentives laws would be tackled under the on-going deliberations on the omnibus code but there were specific laws that could be immediately repealed.

Beginning with the 40 special laws that provided incentives to 40 public and private corporations, Beltran said the DOF’s estimate indicated savings of up to P12.27 billion a year if all 40 laws were repealed.

Beltran said there was a bill pending before the Senate that would repeal 25 of these 40 laws to generate revenues of up to P11.98 billion and another version was pending in the Lower House for the repeal of only 17 special laws to generate P290 million.

The objective of redesigning the fiscal incentives program, Beltran said, was simple. "Government must eliminate tax incentives that do not contribute to the improvement of welfare of the poor or disadvantaged groups," he said.

The incentives provided to airline companies, for example, benefit only income groups that can afford airline fare in the first place.

According to Beltran, the investment incentives found in special laws could be covered by the proposed Omnibus Investment Code provided they were in the Investment Priorities Plan, a list that reflected the government’s shifting priorities over time and changes in administration.