MANILA, Philippines – The Department of Finance (DOF) warned against the negative impact of income tax holidays granted to foreign and local investors.
Finance Secretary Margarito Teves said the grant of these tax perks continues to affect the country’s fragile fiscal position.
The Finance chief said the department has updated Malacañang on the plan to rationalize the country’s fiscal incentives regimen.
“We sent the memo to the President. We’ll try to work on the incentive we hope we will achieve in terms of increasing the amount available for infrastructure and at the same time we think other type of incentives will be more meaningful,” he told reporters on the sidelines of the 27th Biennnial Convention of the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc. on Friday night.
The finance department has expressed concern over House Bill 5241 that was passed by the House of Representatives on second reading last March 3 since it could put more pressure on the government’s deteriorating fiscal position.
The Finance chief said DOF would coordinate closely with the Senate in order to push for the phase out of the income tax holidays in order to save at least P10 billion to bankroll infrastructure projects.
“Their (Lower House) approved bill is a version that is not consistent with our proposal, so we’re waiting for the Senate version. If it’s going to be consistent with our version, then we can use that to recommend to the President for certification,” he added.
In the House proposal, there is no definitive phase-out of the income tax holiday and states that a phase out of the income tax holiday in the future should be recommended by the National Economic and Development Authority Board and mandated by a joint resolution of the Senate and the House of Representatives.
Furthermore, the House version also does not include a phase out of the income tax holiday for exports, agriculture, infrastructure, shipping, and strategic enterprises.
The finance department prefers to phase out the income tax holiday over a six-year period or when infrastructure spending to gross domestic product has reached five percent to raise resources to bankroll infrastructure.
In the first two months of the year, the country’s budget shortfall already swelled to P67 billion from P32.9 billion in the same period last year due to the dismal performance of revenue agencies and higher spending. The government is eyeing a budget gap of P177.2 billion this year or higher than the programmed ceiling of P102 billion. — Iris C. Gonzales, Philippine Star