Recto favors rationalization of fiscal incentives

The government should focus on passing the measure that would rationalize the country’s fiscal incentives instead of reviving proposals to impose a tax on text or short messaging service, Socioeconomic Planning Secretary Ralph Recto said over the weekend.

“Something that we should all focus is the incentives tax. It’s a fairness issue so we have to push for the rationalization of this,” Recto said.

He said this should be the priority instead of reviving proposals to impose a tax on text messaging.

He argued unlike alcohol or cigarettes, cellular phones are not luxury items. As such, he said, it would not be practical to impose a tax on text messaging.

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

The two agencies – which had previously been at loggerheads on the issue of fiscal incentives – have agreed on a gradual phaseout of income tax holidays (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.