DOF to scrap tax holidays for investors

MANILA, Philippines – The Department of Finance (DOF) is planning to totally scrap income tax holidays (ITH) for investors in the next six years, a ranking government official said.

In an interview over the weekend, a ranking government official who spoke on condition of anonymity said that the DOF has a draft order on the rationalization of fiscal incentives that will totally remove the ITH in six years time. This move, the official said, will surely make the country less competitive in terms of attracting more investors.

Board of Investments (BOI) managing head Cristino L. Panlilio confirmed that the DOF is initiating moves to rationalize and streamline incentives given to investors. Panlilio, who is also a Trade undersecretary, said that the DOF is proposing a stricter incentive plan. “We want to see the master plan. We are in favor of incentives. Other countries have more liberal incentive programs than us,” Panlilio said.

He said he has formed a task force to deal with the rationalization of incentives and they will sit down with the DOF to discuss the matter.

“We will retain the kind of incentives that we are giving but we will review the industries that are being given incentives,” Panlilio said.

Meanwhile, the source said the BOI is opposed to the idea because this will make the country an unattractive investment destination.

“Even advance countries like Japan, the United States, Singapore, Thailand and Malaysia provide incentives. In fact, their incentive packages are better than ours,” the official said.

The official said that the DOF would like to remove investment incentives in order to collect more taxes. However, if investors will not pump money into the country then there will be no tax to collect altogether. Currently, companies enjoying ITH still pay taxes like the value added tax (VAT).

At the same time, the official said that the proposal goes against the thrust of the Aquino administration to promote the six industries chosen by the economic managers because this will hamper investments and will make our neighbors a more attractive investment destination.

Should the proposal of the DOF be passed before the Congress and Senate, the ITH will be removed six years after the bill has been passed into law. This proposal will not only affect BOI-registered firms but all the companies within the Philippine Economic Zone Authority (PEZA), Subic and Clark freeports.

The source said senators, who were vital in the creation of the ecozones, will surely oppose the move to remove the ITH completely. –Ma. Elisa P. Osorio (The Philippine Star)