Foreign traders push for ITH continuation

The Joint Foreign Chambers (JFC) has asked the President to issue a directive making it clear that the government will continue to give income tax holidays (ITH) to spur economic activity in the country.

“We urge the Office of the President to issue a directive making clear that it is administration policy to continue ITH for targeted economic priority activities and to encourage the DOF (Department of Finance) and DTI (Department of Trade and Industry) to reach a single agreed position on the rationalization of fiscal incentives legislation,” the position paper submitted by JFC to Congress stated.

The call was made as the House of Representatives is studying four bills that aim to rationalize the fiscal incentives given by the government.

All the bills agree that there is a need to rationalize/remove old incentives in numerous laws passed over recent decades which drain needed revenue, allow redundant incentives and have created a myriad of incentive-awarding authorities.

It likewise calls for limiting the awarding of ITH, the need to monitor the application of incentives; and the need for an agency to promote investment, especially to foreign investors.

According to JFC, it is not proper for a service enterprise that gets 70 percent from its revenues from domestic sales to be given the same fiscal incentives as an export enterprise.

JFC said there should be a threshold of 70 percent foreign currency generated revenues from non resident clients.

Also, the group said that all registered firms should not automatically be given an eight-year ITH. Instead, an ITH of four to six years must be given initially with possible extension of two additional years.

Eight years should only be given to export companies with large capital investments and sizeable employment generation or to enterprises which use high level of technology, the position paper said.

JFC likewise asked the Congress to consider the possibility of extending ITH for as long as 15 years for extremely exceptional investments, which might create tens of thousand of direct jobs and a multiple of that in indirect jobs and generate an estimated increase in tax revenue form income. JFC said this is done in Singapore.

For example, a 15-year ITH may be given to an investment exceeding $1 billion in a massive resort or retirement development, a manufacturing plant or a large outsourcing operation that guaranteed to create 20,000 to 30,000 jobs during the duration of the ITH.