DOF nixes extension of sunset period for TEZ incentives

MANILA, Philippines — The Department of Finance is not keen on the possibility of extending the sunset period for the grant of incentives to tourism enterprise zones (TEZs) which will lapse next year, a top official said yesterday.

Finance Secretary Carlos Dominguez said the DOF would, in fact oppose any proposal to extend the sunset provision under Republic Act 9593 or the Tourism Act of 2009, which provides incentives to tourism zones identified by the Tourism Infrastructure and Enterprise Zone Authority (TIEZA).

This is despite the six-year delay in the implementation of the law.

 “That law was passed in (2009) but never implemented by the last administration. One of the first things I did was implement it. And we will have to run its course,” Dominguez said during the general membership meeting of the Philippine Hotel Owners Association (PHOA).

According to Dominguez, the current administration of the DOF should not be blamed for the failure in the implementation of the law.

 “The law is the law. It’s not my fault that it was not implemented. We actually are the ones who implemented it in 2016,” he said.

Under RA 9593, TEZs would be able to enjoy incentives, such as income tax holidays spanning six years; gross income taxation of five percent; 100 percent exemption on all taxes and customs duties on the importation of capital equipment; and the exemption of transportation and spare parts from tariffs and duties.

However, the incentive schemes provided in the law will only be in effect for a period of 10 years from its effectivity.

TIEZA had blamed the lack of guidelines from the Bureau of Internal Revenue (BIR) for its inability to implement the law and grant incentives.

BIR was only able to issue the implementing rules and regulations for the law in November 2016 through Revenue Regulation 7-2016.

The bureau later on clarified that instead of a sunset clause, enterprises which get accredited until 2019 would still be able to enjoy their incentives for six years.

The DOF, for its part, is pushing for the congressional passage of the Package 2 of the Comprehensive Tax Reform Program (CTRP).

The proposal seeks to lower the corporate income tax rate in the Philippines, while rationalizing the fiscal incentives system.

It also aims to formulate a three-year Strategic Investments Priority Plan (SIPP) to ensure than only industries that provide positive spillover to the economy are given incentives.

The House of Representatives already approved its own version of the bill, dubbed as the Tax Reform for Attracting Better and High-Quality Opportunities, while the Senate is still discussing at the committee level its own version of the tax measure, also known as the Corporate Income Tax and Incentives Reform Act.

Finance Secretary Carlos Dominguez earlier expressed hope that the Congress could pass CTRP’s Package 2 soon enough, in consideration of President Duterte’s appeal to approve the measure within the year.