The Department of Finance (DOF) wants President Rodrigo Duterte to have a direct role in the grant of fiscal incentives to investors that would attract more investments during the COVID-19 contagion.
Finance Secretary Carlos G. Dominguez III, at a meeting of the Inter-Agency Task Force on Emerging Infectious Diseases (IATF-EID) on Tuesday, urged legislators to pass the pending Corporate Income Tax and Incentives Reform Act (Citira) before Congress goes on break on June 3.
The bill had already been passed by the House of Representatives but the Senate sat on it amid concerns that investors would flee the country when tax perks were reduced and lead to job losses.
But finance officials said Citira’s objective was clear—to give rational to tax incentives while reducing income tax rate on businesses from 30 percent, highest in Southeast Asia, to 20 percent over time.
Last week, Dominguez said that the DOF was open to slashing corporate income tax rates “more quickly than originally planned” through Citira.
On Tuesday, Dominguez said that Citira will now “include flexible tax and non-tax incentives so we can target specific companies that we want to invest here.”
Asked to elaborate, Dominguez replied: “Flexibility refers to mechanisms that will allow the government to tailor-fit incentives—fiscal and non-fiscal—to specific investors whose relocation to the Philippines can yield significant economic returns for the country.”
“Benefits would include good jobs for our workers and co-location of key players in cutting-edge industries,” he said.
“One of the structural problems of our current system is the limited room for the kind of negotiations that our neighbors are having to attract potential investors,” Dominguez said.
“Our menu of incentives should not be a one-size-fits-all approach. There are potential investments that are uniquely deserving of incentives for reasons that serve the public interest, but their needs do not fit the kind of incentives specified in our laws,” Dominguez noted.
“Under the original Citira proposal, the President can extend the duration of incentives upon the recommendation of the Fiscal Incentives Review Board (FIRB),” he added.
“Enhancements under a more COVID-19-responsive version of the bill could include the power of the President, upon recommendation of the FIRB, to grant a mix of incentives that better suit an investor’s unique needs,” Dominguez said.
At present, the DOF-chaired board only grants tax subsidies to state-run corporations, but Citira will empower the FIRB to approve investors’ tax perks as well as make it the oversight body for 13 investment promotion agencies (IPAs) giving away fiscal incentives.
“We are already exploring this proposal with relevant committees and leaders of Congress. That would make the system more responsive to investments that will serve our people well,” Dominguez said.
The Duterte administration’s chief economic manager, Dominguez had said that Citira can also serve as a stimulus for a post-pandemic economy as it will attract more investments and generate jobs.
Edited by TSB
Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.