DTI pushes measure on rationalization of incentives

MANILA, Philippines - The Department of Trade and Industry (DTI) is pushing for the approval of the rationalization of fiscal incentives bill within the year.

“It has to be passed this year. If not, it is unlikely to be approved next year,” Trade Secretary Gregory Domingo told reporters.

While the Trade and Finance departments have in the past held opposing views on fiscal incentives, Domingo said the two agencies have reached an agreement on the proposal.

“This is the closest we’ve agreed to since the past 20 years,” he said.

Under the draft bill agreed upon by both departments, firms which will register with the Philippine Economic Zone Authority (PEZA) would have the option to enjoy income tax holidays (ITH) for the first four years of operation and have the next 11 years either be subject to lower corporate income tax rate of 15 percent or five percent levy on gross income earned, or to enjoy the 15 percent income tax rate for 15 years.

The incentives for PEZA-registered firms, he added, could be extended.

Those registered with the Board of Investments (BOI) meanwhile, will be subject to the 15 percent corporate income tax rate for 15 years, which cannot be renewed.

At present, firms registered with the PEZA and BOI enjoy ITH.

Domingo said he expects the draft bill to be submitted as the Department of Finance is preparing the letter containing the agreement reached with the DTI on the proposed rationalization of fiscal incentives to the Congress.

“The DOF is drafting the letter and I am waiting for it so I can sign it,” he said.

Earlier, business groups have raised concerns over the proposed rationalization of fiscal incentives.

Vice president for external affairs at the European Chamber of Commerce of the Philippines Henry Schumacher said they support the government’s plan to offer a lower corporate income tax rate for 15 years but noted that it should be offered as an additional incentive option to widen the menu for investors.

Japanese Chamber of Commerce and Industry of the Philippines Inc. executive director Nobuo Fujii said their members would prefer keeping the existing rules and incentives being offered.

The government is simplifying the incentive regime to make the country a more attractive location for investors as well as reduce foregone revenues.