Businessmen belonging to the Joint Foreign Chambers (JFC) support the Department of Trade and Industry’s (DTI) opposition to a measure that seeks to set annual allocations for tax incentives in the national budget.
Representatives of JFC disclosed their position on the grant of incentives in a letter sent to Second District Rep. Romero Quimbo of Markina City, chairman of the House Committee on Ways and Means.
“We write to express support for the position taken by the DTI on House Bill [HB] 2942-Tax Incentives Management and Transparency Act,” JFC’s letter read.
“We are not aware of any country in the world that includes the amount of fiscal incentives granted in its annual appropriations law. Incentives are granted for private purposes, and not for public purpose, as intended by the amounts in the appropriations law,” it added. The JFC said requirements being
proposed by the measure would cause additional burden to foreign investors and will not be good for the country’s competitiveness.
HB 2942 seeks the creation of a tax expenditure account (TEA) from which incentives to be doled out by various investment-promotion agencies (IPAs) will be sourced. The Department of Finance (DOF) had proposed that the TEA be placed under the Budget of Expenditures and Sources of Financing as an automatic appropriation.
The measure also provides that the tax incentives will be treated as both revenue and expenditure from the general fund and will require reporting to the DOF. HB 2942 seeks to regulate tax incentives and ensure transparency in granting these to foreign investors.
The Bureau of Internal Revenue and the Department of Budget and Management had earlier backed the measure. Internal Revenue Commissioner Kim Jacinto-Henares said there is a need to account for the incentives given out by IPAs and determine revenues the government is losing. For its part, the DTI said issuing an executive order that would require IPAs to submit data to the National Economic and Development Authority would suffice.
The DTI had also come out with a position paper outlining its reasons for opposing HB 2942. For one, the DTI said the measure could violate a World Trade Organization agreement on subsidies as incentives coursed through the national budget can be considered a subsidy.
If enacted, the department said the measure could put the country’s competitiveness in limbo as Congress would have the power to thumb down the provision of incentives.