Only investments with 5% minimum value added to get incentives, says DTI

MANILA, Philippines - Trade Secretary Gregory L. Domingo said that the Department of Trade and Industry (DTI) is considering giving tax incentives to investments that has a minimum of five-percent value added.

“We will consider the potential of the industry,” Domingo said. The secretary said that if the value added is only one percent then the government will let the industry grow by itself.

The value added will consider the multiplier effects of the investment in the economy as well as the employment generation.

When asked if this means that they will no longer give income tax holidays (ITH) to green projects, Domingo said that the Department of Environment and Natural resources (DENR) should push for it. “We will not stand in the way.”

Earlier, DTI said they are open to removing the ITH granted to domestic oriented industries as the government continues to find ways to increase revenues.

“We are very open to changing the incentive-giving regime,” Domingo said. He said that the government can replace the ITH given to firms serving the domestic market. Domingo did not say which tax perk they are considering.

The joint report of the DTI and the Department of Finance said the government can save up to P5 billion if the incentives scheme for domestic registered enterprises is amended. The joint report stated that the revenue savings could even grow but it is non estimable at the moment.

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.