Speaker pushes to rationalize the grant and administration of fiscal incentives

SPEAKER Feliciano Belmonte, Jr. is pushing for the passage of a measure that would consolidate and rationalize investment incentives that would promote investments and growth.

Belmonte is the author of House Bill 4152, also known as “The Consolidated Investments Incentives Code of the Philippines.”

“Investments spur growth as more investments translate to more employment opportunities.  It is therefore the policy of the State to ensure that investments incentives shall promote substantial social and economic spill-over and equitable development across income classes and across provinces,” Belmonte said.

According to Belmonte, a balance has been sought to be formulated between the need to attract investments by offering fiscal incentives on one hand and the equally important need to exercise prudence in granting such incentives on the other.

Belmonte said it is the declared policy of the State to ensure investment incentives shall promote substantial social and economic spillovers, equitable development across income classes and across provinces, are fiscally sustainable, financially and economically justifiable and are consistent with international treaties.

Likewise, Belmonte said the state shall grant the necessary investment incentives that encourage long-term and recurrent investment, are simple to administer, time-bound and whose performance and outcomes are easily verifiable and shall devote resources towards monitoring enterprises benefiting from incentives and shall vigorously prosecute abuses.

The bill provides that Investment Promotion Agencies (IPAs) may administer the following fiscal incentives to their respective registered export enterprises:  full income tax holiday; reduced income tax; five percent tax on gross income earned and tax incentive combination.

It also provides that the Department of Trade and Industry (DTI), in coordination with the National Economic Development Authority (NEDA) and the Department of Finance (DOF) shall formulate the Investments Priorities Plan (IPP) for the approval of the President. The formulation of the IPP shall consider measured capacity or the
estimated additional volume of production or service determined to be desirable in each area of investment in order to supply the needs of the economy at reasonable prices, taking into account the export potential of the product, including economies of scale which would render such product competitive in the world market.

Under the bill, registered domestic enterprises which invest in activities in the IPP shall enjoy tax incentives only by locating in any of the less developed areas that include:  full income tax holiday or a 100% exemption from income tax for a period of four years or reduced income tax which entitles a registered export enterprise to a partial ITH equivalent of a 50% exemption from income tax for six years.

The measure provides the registration and granting of tax incentives to a strategic project that will undertake an activity that is not listed in the IPP either as an export-oriented or domestic-oriented enterprise which will significantly contribute to the country’s economic development in terms of pouring in a large amount of capital investment of at least US$500 million, generating a sizable employment of at least 200, utilizing new and internationally competitive technology.

It also provides a 5% tax on gross income earned by private developers of the Philippine Economic Zone Authority (PEZA) eco-zones in lieu of all national and local taxes except the value-added tax and real property tax.

The proposed measure also seeks to provide guidelines for the entry and exit of imported articles in the economic zones and free ports and for streamlining the institutional structure governing tax incentives.

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