House OKs Investment and Incentives Code of the Philippines

MANILA, Philippines -  The House committee on ways and means yesterday approved the proposed Investments and Incentives Code of the Philippines, one of 23 priority bills of the Aquino administration that aims to enhance the economy’s global competitiveness through investment promotion and industrial development activities.

The bill is a consolidation of House Bill 4152 filed by Speaker Feliciano Belmonte Jr. and Majority Leader Neptali Gonzales II, HB 3162 that was filed by Pampanga Rep. Gloria Macapagal-Arroyo, HB 938 by Tarlac Susan Yap, and HB 4402 by Bataan Rep. Albert Garcia.

“The state should ensure that investments incentives shall promote substantial social and economic spillover and equitable development across income classes and across provinces,” Belmonte said.

He said fiscal incentives would be offered to strike a balance between the need to attract investments and the need to exercise prudence in granting such incentives.

Gonzales said investments spur growth as more investments translate to more employment opportunities. It is therefore the policy of the state, he said, to ensure that investments incentives shall promote substantial social and equitable spillover and equitable development across income classes and across provinces.

Arroyo, an economist, said the proposal if enacted into law would generate more revenues and savings for the government by eliminating redundancy in all existing laws.

“The government offers fiscal bonuses to investors under various incentive laws, which become redundant in some cases. The fiscal cost to government of these incentives in the form of foregone revenue amounts to P47 billion. This could substantially fund basic social services in the form of more school buildings, hospitals, or infrastructure facilities like roads, bridges, and ports, among others,” Arroyo said.

Since these incentives are provided under different laws with differing provisions, she said there is an urgent need to harmonize these by offering attractive fiscal discounts on one hand and exercising prudence in granting it.

Garcia, chairman of the House committee on trade and industry, said an Investments and Incentives Code would enhance the country’s competitiveness as an investment site and ensure that incentives are cost efficient.

“While a number of investment-enhancing measures are in place, a more effective policy framework that would provide a stable and predictable investment regime for the country underpins the urgent enactment of the proposed Investments and Incentives Code of the Philippines,” Garcia said.

He said the increasing global competition requires an enhanced policy framework for investment, including a strengthened institutional system, and implementation of more effective investment promotion strategies to vigorously market their countries. He said the rationalization of incentives is necessary in order to streamline regulation, which is considered as a requisite in attracting investments, among other things.

The bill provides that the investment policies of the state shall specifically be to: pursue a market-responsive investment regime; formulate industry and development programs; undertake investment promotion activities; grant incentives that are simple to administer, time-bound and performance-based, and recognizes that industrial peace is essential to attracting investments.

It assigns the Board of Investments to formulate an evolving National Framework for Investment Promotions (NFIP) and promulgate its rules, regulations and policies that shall govern all Investment Promotion Agencies (IPAs).

The BOI shall also formulate an evolving National Framework for Industrial Development and promulgate its rules, regulations and policies in consultation with the private sector. The NFID shall identify key emerging markets or industries that will substantially enhance the competitiveness of the country, which shall include among others, research and development, agricultural technology, biomedical devices and systems, renewable energy, logistics and information communications and technologies.

The BOI shall also promulgate rules, regulations and policies on the administration of incentives, which IPAs are mandated to implement. It shall establish and act as coordinator of the Investment Promotion Action Center (i-PAC) that shall serve as the link to all government agencies to facilitate entry, retention, expansion and diversification of investments.

On the establishment of Domestic Industrial Zones, the bill provides that DIZs must conform to these criteria, among others: proposed area must be identified as a regional growth center in the Medium Term Development Plan or by the Regional Development Council; availability of water source and electric power supply; area must be strategically located; area must have a significant incremental advantage over the existing economic zones and its potential profitability can be established; and area must be situated where controls can easily be established to curtail smuggling.

Among the proposed incentives to registered enterprises are: income tax-based incentive options for those located inside or outside ecozones or free ports; value added tax (VAT) refund and exemption from customs duty treatment on importation of capital equipment and raw materials; tax and duty free importation of source documents; zero percent VAT rate on the sale by a domestic enterprise to a registered export enterprise; exemption from wharfage dues; and employment of foreign nationals.

The bill also provides incentives for registered domestic enterprises in Mindanao and the 30 poorest provinces or less developed areas (LDAs), namely: income tax-based incentive options; exemption from VAT and customs duty on importation of capital equipment; VAT refund on importation of capital equipment; and special realty rate taxes on equipment and machinery.