DOF bucks inclusion of certain industries in 2013 IPP list

MANILA, Philippines - The Department of Finance (DOF) has expressed reservations over the inclusion of mass housing, shipbuilding, iron and steel, and motor vehicle manufacturing in the lists of industries qualified for fiscal and non-fiscal incentives under the 2013 Investment Priorities Plan (IPP).

The IPP, which is issued annually, lists preferred investment activities that qualify for government incentives.

In a letter to Trade Undersecretary and Board of Investments managing head Adrian Cristobal Jr., Finance Undersecretary Jeremias Paul Jr. has proposed to limit the 2013 IPP to export-oriented investments, qualified micro and small enterprises and research and development activities in line with continuing efforts to rationalize the grant of fiscal incentives and level the playing field.

An official from DOF said there is no final decision yet on the 2013 IPP and that discussions remain ongoing with the BOI, which wants mass housing, shipbuilding, iron and steel and motor vehicle manufacturing retained in the IPP.

“In the spirit of rationalizing the fiscal incentives system, we have strongly advocated a well-targeted grant of tax incentives to investments which will produce the greatest benefits where they are most needed. Subsidizing projects that do not need tax incentives should be avoided because they represent wastage of government resources. A well-thought out process of picking winners through a priority investments list can make it a truly effective tool for industrial growth and economic prosperity,” Paul said.

The DOF argued that some sectors including shipbuilding, iron and steel, motor vehicle manufacture and mass housing have long enjoyed various fiscal incentives from the government and no in-depth studies have been made as to how their including in the PPP has actually helped them.

Paul said infrastructure and energy projects proposed in the list can recover their costs of investments through the pricing mechanism even without tax incentives.

For Public-Private Partnerships, Paul said the BOT (build-operate-transfer law) already provides cost recovery mechanisms for private investors.

“For hospitals and disaster prevention/mitigation/and recovery projects, implementation of which can be favorable to communities, especially the poor and vulnerable, government would be in a better position to provide these projects supported by budgetary appropriations.

Renewables and biofuel projects are already covered by special laws, he said.

Paul said the DOF wants mass housing scrapped from the 2013 IPP, pointing out that it has been in the list of preferred activities for almost a decade now.