DoF seeks limited perks

The Finance Department plans to put an end to the “unlimited” fiscal incentives and other perks enjoyed by the Philippine Economic Zone Authority locators by putting in a so-called sunset provision in the pending fiscal incentives bill in the Senate.

Finance Secretary Cesar Purisima told reporters last week the Finance Department had proposed an amendment to a pending Senate bill that would provide for a sunset provision on the tax perks that are granted to ecozone locators.

“We have this fiscal rationalization bill that’s now pending in Congress. It’s a bill that’s already in the Senate, but there are several things that we want to push. First the principles…one is that there should be sunset provision. Right now, Peza is [imposing], no limit [on availment of tax incentives],” said Purisima.

The Finance Department, in particular, wants to limit the perpetual availment by ecozone locators of the 5-percent special tax on gross income in lieu of all local and national taxes in a bid to standardize incentives granted to investors in the country and raise more revenues for the government.

The department said it is putting a sunset provision on this incentive under the proposed Rationalization and Harmonization of Fiscal Incentives bill.

Sunset provision is a clause in a statute, which in this case is the entitlement of certain industries to fiscal incentives, and provides for its expiration or date when it will no longer be in effect.

Peza locators are entitled to income tax holidays for a maximum of eight years. Afterwards, they can avail of the 5-percent special tax on gross income and exemption from all national and local taxes for as long as their operations subsist.

Gross income refers to gross sales or gross revenues derived from the registered activity, net of sales discounts, sales returns and allowances minus cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a given taxable period.

This incentive package is granted exclusively to Peza locators. Investors in the Subic and Clark free ports are entitled to the 5-percent tax on gross income but they do not enjoy any income tax holidays, while enterprises registered with the Board of Investments enjoy income tax holidays but are not entitled to the 5-percent gross income tax.

Peza, an attached agency of the Trade and Industry Department is tasked to promote investments, extend assistance, register, and grant incentives to and facilitate the business operations of investors in export-oriented manufacturing and service facilities. –Elaine Ramos Alanguilan, Manila Standard Today