Tax-News.com: BIR Plugs Philippines Tax Incentive Rationalization
1. Tax-News.com: BIR Plugs Philippines Tax Incentive
Rationalization
01 May 2015
The Commissioner of the Philippines' Bureau of Internal Revenue (BIR), Kim Jacinto-Henares,
pointed to the "wasteful" fiscal incentives within the country's
investment promotion framework during her address to the recent US
Workshop on Tax Incentives and Base Protection in New York.
She noted that the Filipino fiscal incentives (FIs) system involves 211 special laws that provide
numerous tax incentives from some 14 investment promotion agencies (IPAs), with
each IPA operating differing and competing tax regimes. The estimated cost of
FIs in the country in 2012 was PHP157bn (USD3.5bn), after PHP144bn in 2011 -
over 10 percent of government revenues in both years.
The tax incentives provided to qualified investors include income tax holidays; a five percent tax on
gross income earned; an exemption from taxes and duties on imported capital equipment, spare
parts,
materials, and supplies; a zero rate of value-added tax on sales of goods and services
by local suppliers; and research and development incentives.
However, with regard to their governance and control, Henares said that the
Department of Finance and BIR have a "limited role" in policy formulation
and the granting of incentives. FIs are based on the Investments Priority Plan,
which has been in existence for around 50 years. Data on IPA-registered enterprises and investors
2. is not publicly available, and there is no tax incentives monitoring and evaluation
system.
Henares said that, with the confusion caused by the plethora of FIs available,
no "new investments" are coming into the Philippines; only "recycled
investments" are being generated. With many FIs that no longer attract
new investment still being indefinitely extended, this is also fostering a culture
of tax avoidance.
She expressed the Government's support for the bills before parliament that
would rationalize and increase the transparency of the FI framework in the Philippines.
In particular, the BIR would like to see a situation where the granting of FIs
is concentrated on one law and one IPA, with their control being handled by
the Department of Finance and the National Economic Development Authority.
Finally, Henares indicated that two essential reforms would be to abolish tax
holidays and to provide a sunset provision
on all tax incentives.
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