Angara told reporters covering the European Chamber of Commerce of the Philippines (ECCP) Membership Luncheon Meeting that the Philippine Economic Zone Authority (PEZA), which has a proven track record of efficiency in administering tax incentives to its export-oriented enterprises, should be allowed to keep its existing set of incentive packages.

“No one in the hearing is advocating a repeal of export-oriented incentives,” Angara said stressing that incentives granted to export-oriented enterprises are highly competitive to begin with.

He, however, also stressed the need to put a sunset clause to incentives being granted to investors.

“Yes I think there should be a sunset clause especially for companies that made money many times over and the World Bank says they are paying less than 1 percent effective tax rate, that seems unfair for people like us paying our taxes, not fair,” he added.

Angara also clarified that such applications should be prospective and be made on a gradual basis.

Angara said this as he expressed optimism that the Fiscal Incentives Rationalization bill is going to be passed by this Congress. The proposed amendment to the country’s tax incentives scheme has been with Congress for the past 20 years, but failed to pass.

He said that passage of the bill will also depend on the progress at the lower House considering that any tax legislation must emanate from the House.

Michael Raeuber, ECCP president, stressed the need for incentives to be competitive with other neighboring countries.

“The DOF/Bureau of Internal Revenue do not accept that we are carrying more costs than what our neighbors have, we need to ring more investors here and we need a level playing field,” he said.

He said that ECCP is agreeable to the proposal of the Trade and Industry Secretary Gregory L. Doming for a 5 percent tax on gross income earned for 15 years, renewable for another 15 years as long as this is done in parallel with the income tax holiday.

At present, PEZA investors are entitled to a maximum of 8 years of ITH and after that they are entitled to perpetual availment of the 5 percent tax on gross income earned.

Angara also clarified before the European businessmen that they have nothing to fear with the proposed TIMTA (Tax Incentives Management and Transparency Act) because this will now be made as an addendum to the national budget.

This has quelled worries from the business community and the various investment promotion agencies (IPAs) over proposed move to appropriate an annual fund for incentives under the General Appropriations Act. Angara said that this will just put in place a monitoring and information system making the granting of incentives to foreign investors more transparent.

“The IPAs didn’t want to be subjected to any other layer of bureaucracy as they are independent through their own charters, so we shouldn’t mess with what’s working so far,” Angara said citing PEZA as the country’s biggest asset in promoting investments.

But he also cited position of the Department of Finance to guard against any foregone revenue.

“I understand where the DOF is coming from and there is a need for adequate information and it doesn’t have that, so they don’t have long term plans in terms of collecting tax,” Angara said.

The creation of a clear monitoring and information on the incentives granted by more than 20 IPAs was a position taken by the DOF, which has some reservations on the granting of incentives to investors.

Source: Manila Bulletin