House fiscal incentives bill to be ready by end of 2015

July 31, 2015 at 11:28

Talks to rationalize the grant of tax perks for businesses operating in the Philippines have been stalled before the House since last year, with legislators seeking to draft a single incentives scheme to replace all existing grants handed out by investment promotion agencies (IPAs).

“We are finishing it on the technical working group level. Judging from what we have done in the past, we’re pretty confident that we should finish it by December, at least in the House of Representatives,” Marikina Rep. Romero Federico S. Quimbo (2nd district), who heads the House committee on Ways and Means, told reporters yesterday.

“Fiscal incentives rationalization is truly a priority measure. We are happy that the President stated it.”

Currently, the Philippine Economic Zone Authority (PEZA) and other IPAs under the Trade department hand out tax perks to export firms operating here, as part of their mission to bring in more investment.

Among the options available to businesses under PEZA include a 5% tax on gross income, and a 15% or 18% tax rate on corporate income in lieu of paying national and local taxes for 15 years. Income tax holidays are also available for the first four years upon start-up.

But last year, the Finance department proposed a 15% tax on corporate income to replace varying incentives packages given to eco-zone locators across the country. This is being discussed by the panel alongside other proposals drafted by House members.

The reduced rates, which will come in lieu of all national and local taxes, will apply for 15 years, subject to appeal for a 15-year extension.

PEZA officials and several business groups have opposed such a proposal, saying changing the rules in the middle of the game may turn investors away.

Mr. Quimbo, however, said his committee is bent on approving a new tax perks package.

“We lost P148 billion just in 2013 just on fiscal incentives. But we want to make sure that we will only remove incentives to those industries that don’t deserve it,” the lawmaker said, though he refusing to name which sectors will likely take the blow from the proposal.

“But those that deserve to have it — meaning, those that generate jobs like manufacturing as well as export-oriented (enterprises) — we won’t simply protect but we will even increase incentives so that we will be more competitive.”

“The criteria have always been (that the applicant) be export-oriented and… able to attract footloose foreign investment, meaning foreign direct investment that has the liberty of choosing whether to put it here or in Vietnam.”

The Philippines is counting on more foreign investment to generate jobs.

Congress reopened on Monday for its last stretch of sessions, and will close by February to give way for next year’s election campaign.

As a rule, all tax measures must come from the House. It is only after the House approves its version of the bill before Senate can start formally discussing the proposal.

The fiscal incentives rationalization bill is considered a priority reform by business groups. Lawmakers have also included the measure as a top legislative priority for the remainder of the sessions.

The proposal is also being considered as a means of offseting possible lost collections due to a planned reduction of income taxes for individual and corporate taxpayers. The committee expects the hit to revenue to be P92 billion.