One of the Palace’s priority measures, the Rationalization of Fiscal Incentives (RFI) bill, is now considered dead in the lower chamber after the Department of Finance (DOF) and the Department of Trade and Industry (DTI) have failed to reconcile their positions on the measure, the chairman of the House Committee on Ways and Means said on Tuesday.
Panel chairman and Liberal Party Rep. Romero Quimbo of Marikina, in an interview with reporters, said there will be no more time for the lower chamber to pass the RFI bill “because of the inability of the two agencies to come together.”
“Their [DOF and DTI] positions are just too diverse and far apart that there’s so little time to actually bridge them together,” Quimbo said.
“There’s no more time for rationalization of fiscal incentives considering the DTI and the DOF cannot reconcile their differences. This will involve close to 78 industries so its very very important that we’ll be able to know their specific inputs,” the lawmaker added.
The bill is among the 16th Congress and Palace’s priority measures.
During the last hearing of the House Committee on Ways and Means on the RFI bill, Trade Undersecretary Adrian S. Cristobal Jr. identified four contentious issues.
- Implementation of a uniform incentive package for all economic zones consisting of a four-year income-tax holiday (ITH), after which a choice of either a 5-percent reduced tax on gross income earned (GIE), or a 15-percent corporate income tax (CIT) for 11 years (total of 15 years).
- Renewability of either the 5-percent GIE or the 15-percent CIT for 15 years, upon review after 15 years. This incentive is on top of the ITH and GIE/CIT combination, totaling to 30 years of incentives availment. While the DTI is in favor of the time-bound perks, the authority to renew or terminate incentives should lie with the investment-promotion agency boards.
- Implementation of any change in the incentive package, either for export-oriented enterprises in the Philippine Economic Zone Authority (Peza) or the Board of Investments (BOI), should be prospective.
- Existing locators who enjoy the present package should be given an option to migrate to the new scheme.
Cristobal said keeping the incentive packages attractive is significant now that other competing Asean member-nations are offering better packages.
Vietnam, for instance, offered Samsung a 30-year ITH for the electronics giant to locate there. Indonesia, according to Peza, just doubled its ITH period from 10 years to 20 years.
The DOF, however, remained firm in its opposition, specifically on the second issue.
Also, the RFI bill has been facing strong opposition from business groups due to its provisions, particularly the lifting of the tax- and duty-free incentives of several industries.
Quimbo earlier said the government is losing billions of pesos by giving incentives.
“We lost P148 billion in 2013 on fiscal incentives but [with the passage of the RFI bill] we want to make sure that we will only remove incentives to those industries that don’t deserve it…however, those who deserve it, meaning those that generate jobs like manufacturing, as well as [those who are] export-oriented, we will not only protect them but we will, in fact, even increase their incentives so that we can make it competitive,” the lawmaker said.
Quimbo, meanwhile, said the lower chamber will monitor the implementation of the proposed Tax Incentive Management and Transparency Act (Timta), which was recently ratified by the both chambers of Congress.
“We agreed as substitute to that [RFI] in terms of accomplishment is really the Timta that’s one major step for us to be able to pass a better RFI. Through Timta, we will see which incentives are best and which are not, because data are now available,” Quimbo said.
The proposed Timta seeks to promote transparency and accountability in the grant and administration of tax incentives to business entities, and private individuals and corporations.