Government to spend 50% of savings on infrastructure projects

The government intends to spend the revenue savings from the fiscal incentives reform measure to infrastructure projects and education-related programs, latest data from the Department of Finance (DOF) showed.

“Our proposal calls for allocating 50 percent of the revenues saved to finance infrastructure and the other 50 percent to fund education-related programs,” the DOF said.

The DOF estimates a revenue savings of P10 to P30 billion yearly from the fiscal incentives bill.

Fiscal authorities believe that improving infrastructure would be a more permanent response to enhancing the competitiveness of the country. This, in turn, is expected to create more jobs.

The DOF said it would call on the private sector to help identify the infrastructure and education-related programs to be undertaken once the revenues from the fiscal incentives measure come in.

Earlier, the Department of Finance and the Department of Trade and Industry have already agreed on the provisions that would comprise the government’s revised fiscal incentives program for local and foreign investors.

The two agencies — which have been previously at loggerheads on the issue of fiscal incentives — have already agreed on a gradual phase out of income tax holiday (ITH) instead of immediately removing this particular incentive.

This means that the ITH would only be removed after five years or after the country’s infrastructure investments reach five percent of gross domestic product from 2.7 percent at present or whichever comes first.

Before the tax holiday is phased out, this would be granted only to exporters or to strategic companies which would have to be defined in the bill.

With this development, lawmakers are now set to draft a new fiscal incentives bill which would include the inputs of the Trade and Finance departments.

Earlier, the International Monetary Fund (IMF) also urged the government to rationalize the tax incentives given to local and foreign investors, saying that this would help the Philippines improve its fiscal position.