DTI backs reforms under TRAIN 2

MANILA, Philippines — The Department of Trade and Industry and the Department of Finance are on the same page with regards to the proposed reforms in the second package of the Tax Reform for Acceleration and Inclusion Act (TRAIN 2), Trade Secretary Ramon Lopez assured yesterday.

Lopez said the DTI and the DOF are closely collaborating to provide a unified position to the drafting of a bill and in preparing the different investment promotion agencies (IPAs) on how to maximize the benefits of the proposed TRAIN 2.

“DTI supports the proposed reforms on the existing incentive regime, making it more modern, relevant, responsive, competitive, pro-business, and pro-investments. We adhere to the principle that the incentives to be provided by the IPAs will be focused, time-bound, performance-based, and transparent,” he said.

Lopez said his agency is agreeable to a Strategic Investment Priorities Plan (SIPP) to be recommended by the Board of Investments to the President.

The SIPP will list all the preferred areas of investment activity, in which the BOI will undertake inter-agency and stakeholder consultations.

“We welcome the expansion of the available incentives to include a menu which will be more useful for project proponents pursuing strategic and socially-relevant projects rather than offering income tax holiday as a one-size-fits-all tool for attracting investments from across different sectors,” he said.

“We see the imperative for and agree to the proposed removal of the nationality requirement and the bias for exports. What is important is that jobs are created here in the Philippines for the Filipino people, regardless of ownership or market to be served. Markets for goods are already contestable under our free trade agreements,” Lopez added.

Based on previous DTI and BOI engagements with public and private stakeholders, Lopez said the agencies have received inputs and recommendations mostly on preserving the one-stop shop character of the Philippine Economic Zone Authority and IPA transactions, as well as harmonizing the tax rates and fees which the local government units could impose. 

Lopez said stakeholders are also proposing a reasonable duration and modality to allow current investors enjoying the five percent gross income earned to transition to the new regime, while seeking clarifications on the application of VAT exemptions, zero-rating, and refund systems on inputs across locators, and on constructive exports.

“We will continue to hold focused stakeholder consultations on TRAIN 2 and solicit additional recommendations as long as these comply with the fundamental principles of focused, time-bound, performance-based, and transparent incentives and the recommendations or proposals must be supported by data,” he said. 

The trade and finance departments were traditionally at odds on the grant of incentives to investor, with the DTI underscoring the importance of incentives as a way to lure more investments and help create more jobs in the country, while the DOF saw these incentives as revenue-eroding.