THE Board of Investments (BOI) is expected to shrug off the looming rationalization of fiscal incentives, as it is on track to clinch its P680-billion target this year, a trade official has said.
Trade Undersecretary and BOI Managing Head Ceferino S. Rodolfo Jr. said new investors will benefit from the second package of the Comprehensive Tax Reform Program (CTRP). He owed this to the rationalization of incentives, one of the two main principles of the measure, which he argued will level the playing field for potential and existing investors.
“First of all, for those who are not yet here, they will have more advantage because, once tax incentives are rationalized, they will have a menu to choose from. Also, export and nationality biases will be removed, so [it’s] definitely better for the incoming investors that have no presence yet in our country,” Rodolfo told the BusinessMirror in a mix of English and Filipino.
On the other hand, he said trade officials are consulting with existing investors—most of which are operating with fiscal incentives—on how the transition to a new tax regime should go about. The government’s pitch to them is that they could have availed themselves of more incentives only if the system were rationalized.
“For those who have presence here, what we are discussing with them is the transition period, and we are emphasizing that registration [of tax incentives] is not by company, but by project. Therefore, for most of them, even those currently here, even in their current operations, they could have actually availed of more incentives had they been diligently registering their projects,” Rodolfo explained.
The second CTRP package favors those who consistently invest, bring in new technology and whose projects generate employment, he added.
“In fact, this is better because this is really by project. There will be [an] income tax holiday as long as you continue to reinvest; introduce new products [and] technology, then you can be given incentives,” Rodolfo said.
With this, the trade official is confident the BOI will hit its investment target this year of P680 billion. In the first semester commitments to the agency grew to P238.9 billion, up by 27.1 percent from P188.02 billion during the same period last year, according to figures from the Department of Trade and Industry’s Bureau of Trade and Industrial Policy Research.
This is worlds apart from what has been taking place in the Philippine Economic Zone Authority. Investment pledges to Peza declined to P53.07 billion from January to June, down by 55.9 percent from P120.22 billion during the same half in the previous year.
Peza officials have been blaming the second CTRP package for the decline in investments. Existing locators are reportedly hesitant about expanding operations, while potential investors are holding on to their money, as tax incentives might soon be overhauled.
Although the BOI is still nearly 65 percent far from its objective, Rodolfo said the agency will most certainly clinch it, as he anticipates fresh projects to come in the second semester.
He also confirmed that four firms, with pledges ranging from P16 billion to P40 billion, will be registering with the BOI soon. The incoming firms belong to the infrastructure, transportation, heavy manufacturing and renewable-energy industries, according to Rodolfo.
With the second CTRP package up for legislative debate, Rodolfo argued the country will not surrender investors in the process. He said what is critical for most investors is not only profitability, but also operational efficiency, which a revamped tax regime can bring.
The House Committee on Ways on Means last week approved in principle the second CTRP package. A technical working group is now integrating all related bills in the lower chamber to come up with a consolidated version.
The second CTRP package will slash corporate income tax to 25 percent from 30 percent, as well as rationalize incentives. It hopes to make tax incentives “performance-based, targeted, time-bound and transparent.”