Following a May 18 meeting presided over by bill author and Camarines Sur Rep. Maria Leonor Gerona-Robredo (3rd district), the two agencies found common ground on the proposed Tax Incentives Management and Transparency Act (TIMTA), considered a priority reform measure by the Aquino administration, Congress, and business groups.
TIMTA seeks to establish a process for reporting and measuring the amount and number of tax incentives given to exporters. In exchange for the foregone revenue, the government expects to generate compensating benefits in the form of an expansion in the operations of export locators.
Talks on the measure started in September, but remained stalled at the committee level as the Department of Finance (DoF) and the Department of Trade and Industry (DTI) offered competing versions of an incentives tracking scheme.
A new draft bill combining the features of two proposals now pending before the House was forwarded to the committee on ways and means on Monday, with a letter signed by both Finance Secretary Cesar V. Purisima and Trade Secretary Gregory L. Domingo to endorse the measure for approval.
The agreed-upon measure will tap three agencies to take charge of various parts of the scheme:
• the DoF, which will maintain one database “for monitoring and analysis of tax incentives granted”;
• the Budget department, which will publish the tax incentives data under the annual Budget of Expenditures and Sources of Financing (BESF);
• and the National Economic and Development Authority (NEDA), which will conduct a cost-benefit analysis to assess the impact of the investment incentives on the Philippine economy.
Under the bill, incentives claims submitted by registered businesses to the Bureau of Internal Revenue and the Bureau of Customs will be compiled by the DoF under a single database.
The agencies are likewise required to submit copies of the incentives data and analysis to the House, Senate, and Malacañang every year.
The draft law also does away with Ms. Gerona-Robredo’s original proposal to classify tax incentives as automatic appropriations under the annual budget. Instead, perks granted will be disclosed through a special Tax Incentives Information section under the BESF.
As in the bill, the new section will list the actual amount of tax incentives availed of by registered business entities, the estimated claims of tax incentives immediately preceding the current year, the programmed tax incentives for the current year, and the projected tax incentives for the following year. The Senate’s version of TIMTA carries this provision, which is now awaiting second reading approval.
The DTI and the Philippine Economic Zone Authority (PEZA) earlier opposed the annual allocations of tax incentives in Ms. Gerona-Robredo’s bill, saying this effectively puts a cap on the tax breaks and deductions given by investment promotion agencies to export firms.
A foreign business group said it is inclined to support the new TIMTA version.
Asked whether the new bill addresses concerns raised by investors, Henry J. Schumacher, executive vice-president of the European Chamber of Commerce of the Philippines, said in a text message: “Yes, provided that the fiscal incentives menu stays intact including that of PEZA.”
While acknowledging the need for transparency, the Tax Management Association of the Philippines (TMAP) meanwhile said the new measure should not add more red tape that could deter investors.
“If the proposal is to make tax incentives transparent, that is very good. But if it adds another layer of bureaucracy to foreign investors, it might discourage investments from coming in,” TMAP President Terence Conrad H. Bello said by phone.
TIMTA will be taken up by the committee during its Wednesday meeting, its sixth on the measure. The chairman, Marikina City Rep. Romero Federico S. Quimbo (2nd district) said he is hoping for the measure to finally secure approval, though he added that changes can still be made to the proposal.
“I think what it does now is that at least, the two main departments are already in agreement. But as to whether their proposal is acceptable to everyone, I cannot honestly say that,” Mr. Quimbo told reporters on the sidelines of a hearing yesterday. “I cannot say that that’s the version (that the committee will pass).”
Source: Business World Online
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