Slow phase-out of income tax holidays to start once infra improves

MANILA, Philippines- The Department of Finance and the Department of Trade and Industry have agreed to slowly phase out income tax holidays extended to foreign and local firms investing in the country, once infrastructure spending reaches 5 percent of Philippine economic growth. In an interview with reporters, Finance Undersecretary Gil Beltran said the agreement was reached during a technical working group meet in the House of Representatives on Monday. Congress is trying to broker the rationalization of fiscal incentives given to the country's investors. Beltran said both the DOF and the DTI agreed to put in place the “sunset provision" wherein income tax holidays extended to investors would be phased out slowly starting at the time the country’s infrastructure spending reaches five percent of gross domestic product. He pointed out that the country’s infrastructure spending only reached 2.7 percent of GDP last year well below the average five percent of GDP in the Asia Pacific region. Beltran said, that even if it is pressured to improve tax administration, the DOF understands the need to raise the government’s infrastructure spending to be able to compete with neighboring countries in attracting more foreign direct investments. The DOF is supporting the bill of Antique Rep. Exequiel Javier that would strip the Board of Investments of its function of administering incentives to registered enterprises, phase out ITH in three years, and abolish its power to formulate the Investment Priorities Plan. The proposed bill would amend Executive Order 226 otherwise known as the Omnibus Investments Code of 1987 as a new set of fiscal and non-fiscal incentives would be extended to registered export and domestic enterprises. However, multinational companies represented by the Foreign Chambers of the Philippines stressed the need for the government to first address the poor infrastructure in the country that is detrimental in attracting more investments. It argued that Malaysia, Thailand, Indonesia, Singapore, and Vietnam offer income tax holiday to investors and are rated more competitive than the Philippines in key areas such as corruption, policy stability, political stability, energy, investments in education, labor costs, and other factors. The DOF sees the govermment saving between P10 billion and P30 billion from the rationalization of the country’s 146 tax incentive laws. - GMANews.TV