The Department of Trade and Industry (DTI), long opposed to any change in the administration of fiscal incentives, is now looking for ways to convince the private sector to accept the will of President Aquino to rationalize the grant of perks to qualified undertakings, as he indicated in his last State of the Nation Address (Sona).
“We’re not 100-percent consolidated with the Department of Finance [DOF], but very little na lang ang hindi mapagkasunduan [was not agreed upon]. Now is the best time to pass it,” Trade Secretary Gregory L. Domingo said in a recent interview with reporters.
Before the Sona last week, the Rationalization of Fiscal Incentives (RFI) bill was foreseen to languish in Congress, much in the same way it failed to progress in the last 16 years due to the continued disagreement between the DTI and the DOF.
But things have changed, as the two Executive offices have mended their differences on the RFI bills, much the same way they have agreed to push through with the Tax Incentive Management and Transparency Act (Timta).
They initially agreed to just push the Timta, as it seemed easier to sell to lawmakers and the private sector.
However, Mr. Aquino included the RFI bill on his priority legislation agenda in last week’s Sona, forcing the DTI, the DOF and lawmakers to go back to the contentious measure.
In the draft compromise bill of the DTI and the DOF in February, both agencies have already agreed on giving a “15 for 15” (15-percent reduced corporate income tax for 15 years) incentive package to companies registered with the Board of Investments (BOI).
This will replace the BOI’s income-tax holiday (ITH) given to qualified firms for up to eight years.
For the Philippine Economic Zone Authority (Peza), two options were given:
Maximum ITH availment is capped at four years. After the four-year period, Peza-registered companies may enjoy a 5-percent gross income tax in lieu of local and national taxes, except value-added tax (VAT) and real-property tax (RPT), for 11 years; or
A 15-percent reduced corporate income tax (CIT) in lieu of local and national taxes, except VAT and RPT, for 11 years.
Domingo said the hurdle now is convincing the private sector, which remains lukewarm about the idea of changing the incentive package given by the investment-promotion agencies (IPAs) to investors.
“The challenge now is getting the private sector to accept it. Any change, even if it’s good, will always be met with opposition. That’s why we advised the foreign chambers to study and do the calculations first [on the new incentive scheme] before they oppose it,” Domingo said.
Even with foreign chambers consistently listing the RFI in position papers as a negative move on the part of the government, the DTI is urging action on the legislation before the end of the year so it would not be derailed by budget deliberations and the campaigning of lawmakers.
“Yes, kailangan [i-fast-track ’to], along with mining taxation and taxes on soft drinks,” said House Ways and Means Committee Chairman Rep. Romero S. Quimbo, when asked if the House of Representatives will fast-track the bill.
Senate Ways and Means Chairman Sen. Juan Edgardo M. Angara added: “It’s always been a priority, as evidenced by the numerous consultations we have.”
“We’ve passed a lot of legislation that was deemed ‘unpassable’ before, like the fair competition bill, the cabotage bill and the ‘sin’ tax bill. I’m hoping this is another major legislation we can pass before the present administration ends,” Domingo said.