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Philippines: Government urged to defer overhaul of fiscal incentives
The Israel Chamber of Commerce of the Philippines (ICCP) is asking the government to put on hold its plan to rationalize fiscal incentives given to companies as making changes would only lessen the country’s appeal to investors.
ICCP president Itamar Gero said his group sees the government’s plan to overhaul the fiscal incentives as “too soon,” noting the country’s current investment regime is one of its most competitive advantages in attracting investors at present.
“The thing is you started with something and now you are changing the rules of the game. They are looking to mitigate the tax incentives they are giving by taxing harder on specifics so you have to do your math, you have to choose your battles,” Gero said.
“Every action, there is a reaction and it is not the right time. I am sure every sector will defend itself. When the investment momentum is at its peak then the Philippine government can think about sunsets on those incentives,” he added.
Gero said Israeli companies prefer to see stable government regulations and financial incentives before coming to the country.
“Israeli companies would look for the stability and the transparency in taxation and regulation because when Israeli investments are coming here, they will not be small investments. These are investments that will require stability in the long-term and we want attractive incentives to be sustained,” Gero said.
Sen. Franklin Drilon has filed Senate Bill 229, otherwise known as the “Act of Rationalizing the Grant and Administration of Fiscal Incentives and for Other Purposes” which aims to streamline incentives being given by investment promotion agencies (IPA) in the country.
“The incentives provided under the proposed measure may be granted by the IPAs to the registered enterprise to the extent of their registered activities. Income derived from non-registered activity or project shall, thus, be subject to appropriate taxes under the National Internal Revenue Code, as amended,” the bill’s explanatory note stated.
According to the ICCP, affected primarily by the bill are incentives granted to economic zones and freeport zones locators.
After a four-year income tax holiday (ITH), companies located inside Philippine Economic Zone Authority (PEZA) zones currently enjoy a preferential five percent tax on gross income earned (GIE).
Should the bill be passed, however, the ICCP said PEZA locators after four years will either get five percent GIE for the next 11 years in lieu of all national and local taxes, except value added tax (VAT) and real property tax (RPT), or 15 percent corporate income tax (CIT) for 15 years in lieu of all national and local taxes, except VAT and RPT.
The 15 percent CIT will also be used on all companies registered with the Board of Investment as they will also no longer enjoy any form of ITH.
The ICCP said all incentives will then become renewable as determined by the government’s IPAs.
The government has stated in the past that while incentives are necessary, they should “not be perpetual” and that sunset provisions should be imposed.
Trade Secretary Ramon Lopez earlier said his agency and the Department of Finance, traditionally at odds on the grant of incentives granted to investors, have reached a common ground to modernize fiscal perks for economic zone locators.
In the past, the DTI has underscored the importance of incentives as a way to lure more investments and help create more jobs in the country.
The DOF, however, saw these incentives as revenue-eroding.
“We are changing what it is called to modernizing incentives. It’s more appropriate because when you say rationalization, that means cutting of incentives but with modernizing, it means making it more relevant to what’s needed by investors,” Lopez has said.
The ICCP is currently one of the fastest growing business chambers in the country with plans to enlist more than P100 companies next year.
Source: http://www.philstar.com/business/2016/12/15/1653436/government-urged-defer-overhaul-fiscal-incentives