IMF to RP: Consolidate, rationalize fiscal perks

The International Monetary Fund (IMF) said the Philippine government needs to consolidate and rationalize its fiscal incentives over the medium term but it would be up to the authorities how they intended to do it.

According to the IMF, the government need not focus on giving industries fiscal incentives since the money could be better spent providing basic support that improve competitiveness over the long term.

IMF senior adviser Masahiko Takeda said the IMF has not taken any specific position on how the government should rationalize and consolidate its fiscal incentives program but the Fund continued to emphasize that this task would have to be done soon.

"My understanding is that there are numerous laws now in effect and in order to strengthen revenues going forward, it’s useful to consolidate and rationalize them," he said. "That is basically what we are talking about."

The government, through different administrations dating back to President Estrada, has been mulling this consolidation but there has been no agreement on how it could be done.

At present, the concept is to identify specific high-impact and high-return industries that seriously need government assistance in order to succeed or survive.

However, Takeda said meager government resources are better spent on basic support with longer-term impact such as infrastructure. Instead of foregoing revenues by giving out fiscal incentives, Takeda said the government should instead generate these revenues to support serious infrastructure program.

However, Takeda said the IMF is not making any specific recommendations. "We don’t have any specific view at this stage and we’re having only informal communications about the pending measures rationalizing incentives," he said.

The Department of Finance (DOF) has already asked Congress to lift the fiscal incentives of airline companies and 36 other public and private corporations that cost the government at least P300 billion in one year alone.

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

With ample backing from the 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, Cebu Air, Pacific Airways, Air Philippines and Aboitiz Shipping.

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