The Ways and Means Committee of the Senate has proposed amendments on the Tax Incentives Management and Transparency Act (Timta), which include the conduct of cost-benefit analysis on investment schemes.
Under the amendment, the National Economic and Development Authority (Neda) is mandated to conduct an annual cost-benefit analysis on the investment incentives to determine the impact of tax incentives on the economy.
“This will allow policy-makers to make better decisions in crafting or revising laws; in overseeing the implementation of existing investment-related laws; and in managing the nation’s finances,” said Sen. Juan Edgardo M. Angara, committee chairman and sponsor of the Timta bill.
All heads of the investment-promotion agencies (IPAs) must submit to the Neda investment-related data, which will include the list of registered business entities, investment projects, investment cost, actual employment and export earnings. For tax incentives data, the Department of Finance (DOF) will furnish Neda a copy of the reports submitted by the Bureau of Internal Revenue (BIR) and the Bureau of Customs.
As for the monitoring of tax incentives information, Angara proposed an amendment mandating the DOF to submit to the Department of Budget and Management (DBM) the following data: actual amount of tax incentives availed by registered business entities; estimate claims of tax incentives immediately preceding the current year; programmed tax incentives for the current year; and the projected tax incentives for the following year.
The Department of Trade and Industry and the country’s various IPAs have opposed the said provision during a House of Representatives hearing last week and questioned the authority of the DOF to project tax incentives.
For transparency purposes, the data and information will be reflected by the DBM in the annual Budget of Expenditures and Sources of Financing (BESF), which would be known as the Tax Incentives Information (TII) section.
Angara said in a statement that the TII will be limited to the aggregate data related to incentives availed of by registered business entities based on the submissions of the DOF and the concerned IPAs, categorized by sector, by IPA and type of incentive.
The DBM will submit the BESF to the President and to the chairmen of the committees on Finance and Appropriations of the Senate and the House of Representatives, respectively.
“The proposed Timta does not, in any way, diminish or limit the amount of incentives that IPAs may grant pursuant to their charters and existing laws, or prevent, deter or delay the promotion and regulation of investments, processing of applications of registrations and evaluation of entitlement of incentives by IPAs,” Angara said.
Penalties for noncompliance with reportorial and filing requirements were also amended, wherein repeated violations will be penalized with the cancellation of the registration of the business entity.
Meanwhile, any government official or employee who fails to provide or furnish data or information as required under this law will also be penalized.
All proposed committee amendments, which are mostly based on the DTI-DOF agreed version on Timta, were approved in the plenary, and the senators will then propose their individual amendments before voting for its approval on second and third reading.
“Fiscal incentives cannot be evaluated in a vacuum. We need to better monitor the fiscal incentives we give to ensure that the revenue we forgo actually leads to more investments and high-income jobs,” Angara said.
The House of Representatives’ version of Timta is based on the Senate version, and no major differences have thus far been introduced by either chamber. However, House Committee Chairman for Ways and Means Rep. Romero S. Quimbo has spoken out against the Board of Investments’ (BOI) authority to validate incentive claims.
In a hearing last week, Quimbo aired his intention to remove the power of the BOI to validate incentive claims of its registered enterprises, suggesting the validation of incentive availment given to the BIR.