THE Senate ways and means committee is consolidating different versions of a long-awaited remedial legislation rationalizing fiscal incentives, Sen. Ralph Recto, its chairman, reported over the weekend.

“We will take a look at the House [of Representatives] proposal and that of the Executive…. I am sure there is something in between that we can adopt [in the consolidated Senate version],” Recto told reporters, adding, “The idea is to pass something, hopefully, by the end of the year.”

He explained that the Congress and the Executive need to get their acts together and put in place needed reforms in the domestic economy during the global downturn so that the country will have a “better chance” of competing and be “well-positioned for that global turnaround.”

He acknowledged, however, the assessment of experts that such a turnaround will take a long time considering that both the US and Europe are struggling under a heavy debt burden with both economic powerhouses posting very high debt-to-gross domestic product ratios.

Nonetheless, Recto said, the Philippines should start seriously preparing its industries for the time when the world economy is in a better shape. The first priority, he said, is to provide a sound climate for investments by rationalizing the incentives package.

He said incentives for business locators provided by the Philippine Export Zone Authority should continue but agrees that there is a need to revisit the income-tax holidays (ITH).

Instead of an ITH, he suggested that the government should seriously consider imposing either a 5-percent gross income tax, or a 15-percent net income tax.

He also said businesses should be allowed duty-free importation of capital equipment or a value-added tax-free importation of such equipment.

But Recto quickly clarified that existing ITH incentives will not be removed, adding: “We cannot be an Indian giver. We must look prospectively and not change the rules in the middle of the game.”

Meanwhile, he decried the “very weak” investment promotion campaign of the government and proposed that a special fund to promote the country as a haven for investors should be set aside.

Besides luring investments, he added that another key strategy to preparing the economy for the global turnaround is to pursue a complete public-private partnership program.

“Priority investments have been determined in the Philippine Medium-Term Development Plan until 2016,” so the government should simply make sure all the projects listed are matched with the right investors, he said.

“These projects, when completed, will boost the domestic economy, create jobs and make us more competitive. When the global economy rebounds and these projects are in place, you will be prepared for the global rebound also,” he added.

Recto reported that he had already discussed the different proposals to rationalize fiscal incentives with Trade Secretary Gregory Domingo last week and is also due to sit down with Finance Secretary Cesar Purisima on the same issue soon.