By Catherine N. Pillas
The Makati Business Club (MBC) is advising lawmakers not to rush the Rationalization of Fiscal Incentives (RFI) bill, as railroading the measure just to pass it in the present Congress—as committed by President Aquino in his last State of the Nation Address (Sona)—may lead to a slipshod version of the key fiscal-reform measure.
MBC Executive Director Peter Angelo Perfecto said that, while the business sector supports the initiative to streamline fiscal incentives to help plug revenue leakages, sacrificing the content of the law just to ensure its passage this Congress could lead to the erosion of the country’s competitiveness as an investment destination.
“Like what we said before, we do agree with rationalization. That’s important; I think we have to do that.But we have to make sure it doesn’t affect our competitiveness. If [the timeline is too tight], we might make the mistake and we might regret the final form of the law,” said Perfecto at the sidelines of an Integrity Initiative Forum on Thursday.
Congress is now facing a constricted schedule in passing the RFI bill, as the national budget deliberations are already under way. There is also the pressure to pass the Bangsamoro basic law in the present Congress.
On the replacement package of perks currently being proposed by the Department of Trade and Industry (DTI) and the Department of Finance (DOF), Perfecto said the MBC has yet to release a position.
Despite repeated claims of the two departments that they already have a con-solidated position, the proposed bill is still stuck at the committee level in both chambers of Congress. Initially, the two agencies agreed to just move ahead with the RFI’s twin measure, the Tax Incentives Management and Transparency Act.
However, with the President calling for renewed action on the RFI bill in his last Sona, the DTI and DOF are again tackling the incentives-rationalization measure.
Already, the renewability of fiscal perks being enjoyed by registered companies has emerged as another “sticking point” in the discussions on the RFI bill.
Trade Secretary Gregory L. Domingo wants the corporate income-tax (CIT) privilege reduced to no more than 15 years, renewable to another 15 years, subject to the approval of the board of the various investment-promotion agencies (IPAs).
Finance Secretary Cesar V. Purisima, however, wants the 15-year period scrapped altogether. For the DTI, as long as the company can justify continued enjoyment of incentives, renewing the privilege by another 15 years should be okay.
In an earlier BusinessMirror report, an initial consolidated draft on the incentives bill was endorsed by the two agencies for exporters, regardless of whether they are registered with the Philippine Economic Zone Authority (Peza).
In the draft, Peza-registered export enterprises have two available packages. The first package includes a four-year income-tax holiday (ITH), or a reduction from the current six to eight years. The four-year ITH is nonrenewable and nonextendable.
After the ITH’s expiry, companies may be granted either a 5-percent tax on gross income earned (GIE), but they still need to pay value-added tax (VAT) and real-property tax (RPT) for 11 years; or pay 15-percent reduced CIT in lieu of local and national taxes, and still pay VAT and RPT for 11 years.
In the second package, Peza-registered firms—in the absence of an ITH—will pay 5-percent tax on GIE in lieu of local and national taxes except VAT and RPT for 15 years, or 15-percent reduced CIT in lieu of local and national taxes, VAT and RPT for 15 years.
For non-Peza-registered exporters in ecozones and free ports, they either get a 5-percent tax on GIE in lieu of local and national taxes, except VAT and RPT, for a period of 15 years, or pay 15-percent reduced CIT for 15 years.
For exporters outside ecozones and free ports, there are two packages, as well.
In the first package, Peza may allow them to enjoy a four-year ITH, plus a reduced CIT of 15 percent for 11 years.
In the second package, without an ITH, enterprises may enjoy a 15-percent reduced CIT for 15 years, a VAT refund plus duty-free importation of capital equipment and VAT and duty refund on imported raw materials, supplies and semifinished products.
For BOI-registered enterprises, the proposed package is 15-percent reduced CIT for 15 years.
Another point of debate, according to Leaño, is the prospective implementation of the new incentive schemes.
Leaño said the DTI’s stand is to allow the registered enterprises to continue enjoying their existing incentive privileges even after the RFI bill has become a law. For the DOF, however, the new scheme should be followed immediately once the law becomes effective. “We will still discuss that.”
The House of Representatives convened a hearing on the RFI just last week. The chairman of the House Ways and Means Committee, Rep. Romero “Miro” S. Quimbo, assures passage of the bill in the lower house by December.