Government can save up to P5B if incentives scheme for local firms is amended - DTI

MANILA, Philippines - The government can save up to P5 billion if the incentives scheme for domestic registered enterprises is amended, a joint Department of Trade and Industry (DTI) and Department of Finance (DOF) Fiscal Incentives Reform (FIR) report showed.

The joint report, which is expected to be presented in Congress, stated that the revenue savings could even grow further.

The joint proposal of the DTI and DOF zeroes in on the efficiency in the administration of fiscal incentives.

For instance, currently, the DOF does not sit in the board of the Investment Promotion Agencies (IPA) except in the Philippine Economic Zone Authority (PEZA) that is why it has no role in the approval of projects. The proposal aims to include DOF in the board of the Board of Investments (BOI) and other IPAs.

The proposal said that this will ensure that the DOF will have an active role in the investment tax incentives policy formation and administration.

The Investment Priorities Plan (IPP) which is currently being crafted every year will now be formulated once every three years. The proposal is to make the IPP short and focused. The IPP should only comprise of exports and only three to five industry sectors.

The DTI-DOF proposal said that a focused IPP will lessen the risk of granting unnecessary incentives to activities that no longer need government assistance

Likewise, the proposal sets a maximum number of years for the incentives. Currently, PEZA registered firms and IPAs under the BCDA Law have a five percent incentive on the gross income earned (GIE) which can be enjoyed for as long as the investment exists. The proposal sets a sunset for this incentive. That is, this incentive can only be enjoyed for 25 years.

The sunset provision of tax incentives will ensure that the incentives are achieving the purpose of which they are introduced.

Also, the DTI and DOF would like exporters to enjoy the same income based incentives regardless if they are located within an ecozone or not. This, the proposal stated will remove any location bias in favor of the ecozones or free ports.