Saturday, June 28, 2008 [ philstar.com ]
The Department of Finance (DOF) and the Department of Trade and Industry (DTI) have now agreed on the provisions that would comprise the government’s revised fiscal incentives program for local and foreign investors.
A ranking finance official said the two agencies — which have been previously at loggerheads on the issue of fiscal incentives — have already agreed on a gradual phase out of income tax holiday (ITH) instead of immediately removing this particular incentive.
The source said the gradual phase-out of the ITH would be implemented through a so-called sunset provision in the proposed fiscal incentives bill.
This means that the ITH would only be removed after five years or after the country’s infrastructure investments reach five percent of gross domestic product from 2.7 percent at present or whichever comes first, the finance official said.
Before the tax holiday is phased out, this would be granted only to exporters or to strategic companies which would have to be defined in the bill.
With this development, lawmakers are now set to draft a new fiscal incentives bill which would include the inputs of the Trade and Finance departments.
The source said three lawmakers have agreed to sponsor the bill: Quirino Rep. Junie Cua, chairman of the House of Representatives trade and industry committee, Camarines Norte Rep. Liwayway Vinzons-Chato, vice-chairman of the House ways and means committee and Antique Rep. Exequiel Javier, chairman of the House ways and means committee.
Earlier, the International Monetary Fund (IMF) also urged the government to rationalize the tax incentives given to local and foreign investors, saying that this would help the Philippines improve its fiscal position.
The IMF said that “tax incentives substantially reduce effective tax rates on corporate income.”
The Trade department believes that incentives have strongly encouraged local and foreign investors to set up businesses in the country.
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