After debating for a long time on their conflicting versions of the proposed Tax Incentives Management and Transparency Act (Timta), the Department of Trade and Industry (DTI) and the Department of Finance (DOF) are united this time in opposing the changes made by Congress on the contentious bill.
The DTI and the DOF joined the Department of Budget and Management (DBM) and the National Economic and Development Authority (Neda) in expressing concern that Timta has been watered down, thus, defeating the purpose for which the Executive branch is lobbying for the bill’s passage in Congress.
In a position paper signed by the secretaries of the DOF, DTI, DBM and the Neda, the Executive branch expressed its opposition to two particular amendments made by Congress to the proposed Timta.
The objections were made against the deletion of the reporting requirement for the Neda to conduct a cost-benefit analysis on the economic impact of tax incentives on a regular basis. The agencies also opposed the insertion of a “deemed approved” provision, which provides that proposed tax incentives shall be deemed granted if the Bureau of Internal Revenue (BIR) fails to inform the Board of Investments (BOI) or the concerned investment-promotion agency (IPA) of its findings on whether such tax incentives should be granted.
The four agencies said the two amendments contained major policy and administrative deviations from the original intent for which the DOF and the DTI are pushing the passage of Timta.
The position paper said the reporting requirement for the Neda to conduct a regular analysis on the cost-benefit of any particular tax incentive is important to ensure that any grant of fiscal perks contributes to the overall improvement of the economy.
“The publishing of the impact of tax incentives by Neda to relevant government offices and authorities allows for a higher level of understanding of how tax incentives work for the benefit of the economy. The reporting requirement ensures fiscal transparency, in line with the goal to institute a transparent and accountable public financial-management system,” the position paper said.
On the “deemed approved” provision, the Executive branch reminds Congress that the shortened time within which the BIR may audit an entity proposed to be given tax incentives is not enough for the BIR to examine the entity’s books for purposes of whether the proposed tax incentive should be approved.
Under the amendments to the Timta made in Congress, the BIR is now only given 180 days, instead of the original three-year period, within which to inform the BOI or the concerned IPA and the taxpayer of the BIR’s findings on whether the tax incentive should be granted.
The BIR said that, even the original three-year period is already a short enough time within which the BIR can conduct an audit of the taxpayer’s books. Timta aims to promote transparency and accountability in granting tax incentives to business entities, private individuals and corporations. Under the bill, data and information on tax-incentive claims of registered entities and individuals, and the amount of tax and duty incentives granted them, shall be evaluated and monitored under a comprehensive database.