Favila urges synchronized shift from fiscal to non-fiscal perks

A shift away from the grant of fiscal incentives to non-fiscal incentives, specifically focusing on infrastructure development, to attract foreign investors would have to be carefully synchronized, according to Trade and Industry Secretary Peter B. Favila.

While the government’s economic team is basically in agreement on the need to gradually move away from fiscal perks to non-fiscal incentives, Favila stressed the need to carefully synchronize the withdrawal of fiscal incentives to the development of required infrastructure to attract investors.

"It is important that as we withdraw the fiscal incentives, we must be ready with the infrastructure," Favila said.

He acknowledged that putting up the necessary infrastructure needed by investors also has a corresponding cost for the government and has a gestation period.

The Department of Finance and the Department of Trade and Industry are helping Sen. Ralph Recto craft a bill in the Senate which would institute the shift away from fiscal incentives to non-fiscal incentives.

However, Favila said, it would still be up to the Senate to decide on whether or not it is feasible to move away already from fiscal incentives such as income tax holidays.

Finance Secretary Margarito Teves has said that the Philippines is merely following the trend in the region to offer better infrastructure rather than offer income tax holidays.

Under an agreement to coordinate the grant of fiscal incentives, the DTI and the Board of Investments had earlier agreed to send to the DOF details of all projects seeking registration with the BOI.

BOI registration entitles projects to fiscal perks such as income tax holidays and duty-free importation of capital equipment.

However, in an effort to consolidate the country’s fiscal position, the DOF must review the project proposals and determine if the project deserves incentives.

The DOF then makes a recommendation to the BOI, but the final decision is still made by the BOI Board.