DOF bats for rationalization of fiscal incentives

MANILA, Philippines - The Department of Finance (DOF) reiterated the need to rationalize the country’s redundant incentives and at the same time repeal revenue-eroding measures, including perks given to the National Grid Corp. of the Philippines (NGCP) as well as operators of freeports and economic zones in Aurora and Bataan. 

In an interview with reporters, Finance Secretary Cesar Purisima said the Finance department as well as the Department of Trade and Industry (DTI) have agreed to come up with a common position wherein fiscal incentives for major infrastructure projects under the Aquino administration’s public private partnership (PPP) scheme should be retained.

“In the case of incentives, we (DOF and DTI) have agreed to come up with a common position. We have agreed that incentives are still necessary since the Philippines still has issues on infrastructure and it needs to be competitive in getting investors to come in,” he stressed.

He pointed out that both departments, however, agreed to streamline the incentives granted by several government agencies and that there should be a sunset provision wherein fiscal incentives would be phased out.

“The focus should be for investments that won’t come here if not for the incentives. We must minimize the grant of incentives to domestic companies that would make the investments here anyway so we don’t waste incentives,” he added.

According to him, the government must offer flexible incentives to investors instead of uniform set of fiscal perks to various and different projects.

“We must offer incentives not as a set but must be flexible. We must be smarter with (the grant of) incentives,” he said.

Former president and now Pampanga Rep. Gloria Macapagal-Arroyo is batting for the rationalization of investment incentives to eliminate redundancy in all existing incentive laws and generate more revenues and savings for the government.

Macapagal-Arroyo said the fiscal cost to government of redundant incentives in the form of foregone revenues amounts to about P47 billion.

She filed House Bill 3162, also known as “The Consolidated Investments Code of the Philippines,” which aims to promote countryside development by granting appropriate income tax incentives to investors investing in the 30 poorest provinces. It also aims to promote exports equally regardless of their location, whether outside or inside economic zones.

It also seeks to eliminate competition among ecozone administrators on account of unequal tax incentives regimes by eliminating existing redundant tax incentives found in all incentive laws and replacing them with either a reduced income tax package or a gross income tax package.

Lastly, the bill aims to introduce institutional reforms by enhancing capacities and clarifying the mandates and roles of concerned agencies while strengthening the monitoring and reporting processes and mechanisms in implementing these incentives.