Tax credit scheme seen to aid semicon sector

The Bureau of Internal Revenue (BIR) started a supplemental program this month giving tax credit and duty drawback to assist the local semiconductor industry, one of the country’s export winners which has been adversely affected by the global downturn in the electronics industry.

The 50-percent advance tax credit to export program winners will be implemented immediately. The tax credit will be granted to qualified and official claims of semiconductor and electronics companies whose aggregate amount pending claims with the BIR exceeds P10 million as of end September this year.

The program is a radical departure and unique innovation in the tax credit and duty drawback system in the country.

"It was purposely crafted to assist and boost the semiconductor industry’s export performance through the effective implementation of incentive packages, therefore, maintaining and strengthening the country’s competitiveness as an investment destination," the BIR said in a statement.

The semiconductor industry is the country’s leading exporter accounting for more than 70 percent of total exports.

BIR officials added that the project is a direct response to instructions from the Department of Finance (DOF) to achieve a zero backlog of all pending tax credit and duty drawback claims within processing time.

In turn, the urgency of improving and increasing tax collections is guided by the country’s fiscal deficit target of P145 billion for the whole of 2001.

Another tax form is the 15 percent withholding tax on Filipinos employed by multinationals and offshore banking units. Revenue Regulations (RR) 6-2001, likewise, increased to 20 percent the creditable withholding tax on professionals from the 10 percent applied earlier.

Section 2 of RR 6-2001 enforcers a 15-percent withholding tax on alien individuals employed by regional or area headquarters of multinationals, offshore banking units petroleum service contractors and subcontractors. It also applies to Filipino citizens employed by the abovementioned firms occupying the same positions as those aliens (managerial and technical positions) employed by multinational companies, regardless of whether or not there is an alien executive occupying the same position.

"It is one way of managing tax collections in the intermediate future. By increasing the withheld tax, government is assured of an advanced payment of the tax and constant cash flow," BIR Commissioner Rene G. Bañez, said. It could be credited to the individual's income tax returns at the end of the year.

Also known as survival strategies, the short-term strategy is designed to help the BIR achieve its revenue target of P388 billion this year. It is, likewise, designed to protect the integrity of the revenue base, strengthen its organization and internal resources, restore credibility and integrity, and strengthen enforcement.