MANILA — The government eyes a single investment priorities plan across all investment promotion agencies (IPAs) under the second package of the Comprehensive Tax Reform Program (CTRP) of the Duterte administration.
In a forum in Makati City Tuesday, Department of Finance (DOF) Undersecretary Karl Kendrick Chua said the CTRP Package 2 aims to have a Strategic Investment Priorities Plan (SIPP) that would be implemented by the 14 IPAs nationwide.
Chua said the Board of Investments (BOI), the country’s leading IPA, “with extended membership” would be the lead agency to craft the SIPP.
He said the SIPP would be like the current IPP of the BOI but is more strategic, looking at sectors that provide the best benefits for the country.
Under the CTRP Package 2, the government eyes to lower corporate income tax (CIT) rate and rationalizing fiscal incentives that the government provides to investors.
In reforming the fiscal incentives regime, the government wants the giving of perks be performance-based, targeted, time-bound, and transparent.
Chua said just like BOI’s IPP, the SIPP shall be updated every three years and shall undergo annual review.
On the other hand, Department of Trade and Industry (DTI) Assistant Secretary Rafaelita Aldaba said the government should be prepared and be able to identify the composition of the SIPP even before the second phase of the tax reform is enacted into law.
“We should have those strategies ready even before 2019, if legislated towards the end of the year,” Aldaba said.
The government eyes to roll out the CTRP Package 2 by January 1, 2019.
On the sidelines of the forum, Aldaba told reporters that market studies and researches done by the BOI could be adopted in determining the priority sectors under the SIPP.
“We haven’t changed much the priorities. What has changed is we are looking at very particular parts where we want the Philippines to upgrade and participate in the global value chain,” the trade official said.
Under the proposed reform, the BOI shall ensure a more targeted list which includes activities with significant positive externalities.
It also noted that only the President may grant tax perks to economic activities that are not in the SIPP.
Moreover, Chua said the Fiscal Incentives Review Board (FIRB) would head the governance of incentives.
The FIRB will be chaired by the DOF, which will have veto power as the custodian of fiscal prudence and responsibility. The DOF Secretary can also cancel or suspend the grant of incentives upon the review and recommendation of the FIRB.
The DOF will be co-chaired by the BOI, Philippine Economic Zone Authority, and all other IPAs, while the National Economic and Development Authority will be a member in all 14 IPAs.
Included in the incentives menu under the proposed reform is five-year income tax holiday (ITH) and/or reduced rate with no extension, except for customs duty of capital equipment.
Currently, the government grants ITH for four to eight years.
Chua said the CTRP Package 2 aims to replace the 5-percent gross income earned with a reduced corporate income tax rate of 15 percent based on net taxable income for five years.
Under the incentives menu, there will be no more value-added tax (VAT) exemptions and all firms shall pay VAT and prove that they export to get refund.
The reform also eyes that for an entity to be qualified as exporter, at least 90 percent of sales shall be shipped out to a foreign country. This is higher from the current level of 70 percent required by IPAs.
Only one menu of perks will be applicable to all IPAs.
“We have to have a national level of understanding of what our real priorities. Each industry sector will of course see their priority and they all have the right and understanding. But as policy makers, you have to balance. We have limited resources. We cannot favor everyone. There is always a trade off. So the SIPP process hopefully will make it more balanced,” Chua said. (PNA)
