The Department of Trade and Industry (DTI) said it is mulling over the grant of additional incentives to companies that will undertake more research and development (R&D) activities.
Trade Secretary Ramon M. Lopez also said “modernizing” incentives under the present administration does not only mean extending the income-tax holiday (ITH) period.
“The government needs to modernize our fiscal incentives. For example, in other countries, they have ITH of more than five years up to 10 years. They even have triple deduction in R&D expenses,” Lopez added.
The Board of Investments (BOI) currently allows qualified companies to enjoy ITH from four to eight years, depending on the whether the project is conferred a “pioneer” status.
Lopez said changing the country’s incentives regime would also entail setting metrics to track performance.
“I’m not saying the ITH period should be longer. [ITH] is still relevant, but make it performance-based and time-bound. Perhaps, look into all those that will promote R&D,” he said.
The DTI chief said the government could look into offering the net operating loss carry-over (Nolco) deduction and other tax deductions.
A company that registered a net operating loss is entitled to offset a given year’s loss against the succeeding year’s income, subject to conditions. Companies may avail themselves of this once it gets the nod of the Bureau of Internal Revenue.
The BOI currently allows Nolco deductions for companies importing spare parts.
The rationalization of fiscal incentives has always been a contentious matter for lawmakers and government agencies. For one, the DTI and the Department of Finance (DOF) could not agree on how to change the incentive scheme.
In the 16th Congress, the DTI has drafted a “consolidated bill” containing the “replacement incentive packages” for the BOI and the Philippine Economic Zone Authority—the country’s two major investment-promotion agencies.
The bill, however, was shelved as both the DTI and the DOF failed to come up with a consensus on its salient provisions.
In the 17th Congress, Lopez said he is ready to work with the DOF to come up with an “effective” set of fiscal incentives.
“Hopefully, we can direct the incentives to industries, which we want to promote, to make the Philippines a more attractive investment destination,” he added.
Image credits: Philippine Economic Zone Authority Photo