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THE
Department of Finance (DOF) has cited savings as large
as P30 billion a year, savings seen to help fund the
government’s multiyear infrastructure-buildup program,
should the proposed fiscal-incentives rationalization
plan muster Congress.
Dashing
conventional wisdom that taking away incentives like
income-tax holidays would automatically drive away
investors, the DOF pointed out that on the contrary,
investors shun an environment where the fiscal position
is weak; and one way of boosting the government’s fiscal
position is to shore up revenue collection and take out
“redundant”—nearly a quarter of the total—tax and duty
privileges.
Finance
Secretary Margarito Teves, who endorsed the legislative
proposal, also plans to reallocate a portion of the
savings to underwrite some of government’s most pressing
educational programs.
“Our
estimate of revenue savings ranges from P10 billion to
as much as P30 billion.
We
propose that the savings be allocated for infrastructure
and education,” he told the House ways and means
committee recently.
Teves
would also later use the same presentation at a forum
hosted by the Makati Business Club.
He said
“redundant” tax and duty privileges forgone in 2004
alone totaled P156.25 billion, or enough resources to
cover this year’s anticipated budget shortfall twice
over.
Teves
meant tax and duty perks granted the various businesses
that should not have been given away because the
investments were forthcoming regardless.
His
campaign to put more sense into the
investment-incentives program conflicts sharply with the
need to firm up revenue-generation numbers as a whole;
and highlights the difficulty of striking a balance
between what the government can safely give away as
incentive while still keeping its fiscal house in order.
Already,
the different foreign chambers of commerce have turned
to Malacañang for policy clues given Teves’s avowed
intent of collecting as much from the investing public.
Teves
truly needs the money to underwrite a buildup program
seen to encourage newer and bigger investments, both
local and overseas, and help boost the growth momentum
for the long haul besides.
At the
core of the rationalization program is the projected
abolition of the Board of Investments and its penchant
for extending income tax holidays (ITH) that must be
phased out three years from the passage of the measure.
He said
the ITH was the most redundant of incentives, prone to
abuse, requires a high degree of government audit and
has virtually failed to attract foreign direct
investments (FDIs) as intended.
Teves
said of the P156.25 billion given away as tax and duty
incentives in 2004, P62.5 billion, or 22 percent, were
considered redundant.
He also
presented data proving that FDIs refused to come in
during those years when the budget deficit was high, and
thus, a compulsion for the government to correct the
situation via legislation.
“Gross
fixed capital formation, which includes FDIs, is highly
correlated to the fiscal position,” Teves said. |
