MANILA, Philippines — The Department of Finance on Tuesday said it is proposing the amendment or repeal of 123 special laws on investment incentives and consolidate them into one omnibus incentive code in a bid to rationalize the country’s “complicated” fiscal perks for industries.
“Currently, we have 14 investment promotion agencies. Outside the tax code, we have 123 laws that grant various forms of investment incentives and 210 laws that grant non-investment incentives,” Finance Secretary Carlos Dominguez III told lawmakers during the first congressional hearing on Package 2 of the government’s Comprehensive Tax Reform Program.
“The situation cries out for rationalization,” Dominguez added.
House Bill 7458 provides for graduated cuts in the corporate income tax rate from the current 30 percent to 20 percent, as well as the modernization of investment incentives by ensuring that only qualified industries are given fiscal perks.
According to Dominguez, the Philippines gives out the most generous tax incentives because “they are granted forever.”
“Incentives given out by all other countries in the region are time and performance bound. When we give out incentives without limit, the practice erodes both accountability and performance,” he said.
BMI research earlier warned that investments could slow over the near-term amid “uncertainties” over the government’s proposed conditional corporate tax reduction and repealing of fiscal incentives.
The unit of Fitch Group also said that while the proposed tax reforms may be fiscally prudent, it will likely make the Philippines less competitive versus its regional peers.
But Dominguez said incentives are not the sole drivers for investments, citing the Duterte administration’s efforts to attract investors by maintaining peace and order, wiping out corruption and eliminating red tape.