ALREADY two months delayed, the implementing rules and regulations (IRR) of the Tax Incentives Management and Transparency Act (Timta) will have to undergo further public consultations before it is finalized due to the continuing disagreement between the Board of Investments (BOI) and the Bureau of Internal Revenue (BIR) on the information-disclosure provision.
Efren V. Leaño, BOI executive director, said Trade Secretary Adrian S. Cristobal Jr. saw the need to continue engaging companies and other investment- promotion agencies (IPAs) on the Timta IRR to determine what route to take in implementing the key economic-reform measure.
He said compliance to the newly passed Timta is still a contentious issue between the BOI and BIR.
“We’re still talking about what should be reported and the DTI [Department of Trade and Industry] wants to talk to more stakeholders —the companies, and not just the other IPAs,” Leaño said.
“Basically, the BIR already has the tax information like the VAT [value-added tax], and the income- tax holiday, so what else do they need from us? The information that companies should give, that’s where the contentions are,” the BOI official said.
The Department of Finance (DOF) had long sought for transparency in the grant of fiscal incentives by the country’s various IPAs through the Timta.
This, the DOF earlier contended, will clearly show the extent of the government’s fiscal exposure in granting tax perks to select industries and investment types.
The Timta mandates the registered businesses to submit a tax-incentives report to their respective IPAs, which, in turn, will collate these report for submission to the BIR.
The Timta was enacted into law on December 9, 2015, and became effective 15 days later. The Timta IRR was supposed to take on February 26.
The BOI, an attached agency of the DTI, supports transparency in the grant of fiscal perks. It is, however, also safeguarding the competitiveness of the companies registered with it and other IPAs, as well as the inflow of domestic and foreign investment.
The agency feared that mandating the disclosure of too much information on the operations of companies would erode their competitiveness and turn away investors.
The DOF and DTI managed to reach a compromise on several provisions that allowed the passage of the Timta into a law. However, the content of the tax-incentives report still needs to be threshed out in the IRR.
The DTI already said it is against disclosing information on a per-company basis, as well as prospective investments plans, as this may jeopardize the competitiveness of firms.
According to the law, the DOF will submit to the Department of Budget and Management the following information, but only on a sectoral and industry basis (not on a company basis) for monitoring purposes: The amount of tax incentives availed of by registered business entities; The estimated claims of tax incentives immediately preceding the current year; the programmed tax incentives for the current year; and the projected tax incentives for the following year.
The DTI said projecting the tax incentives could lead to inaccurate reporting of data, as IPAs have no way of predicting how much incentives they will give in a particular year.
The department also fought against the maximum penalty of canceling the registration of businesses should they fail to comply with the electronic filing and reportorial requirements required by the BIR . This, however, became part of the law.
Leaño said they have no timeline yet on the resolution of the contentious issues in the IRR, but stressed that talks with the BIR are ongoing, and more consultations will be done with private stakeholders.