MANILA -- The Department of Trade and Industry (DTI) expressed support for most provisions of the proposed Tax Reform for Acceleration and Inclusion Package 2 (TRAIN 2), but indicated that it is also closely coordinating with the Department of Finance (DOF) to air the concerns of various stakeholders.
During a hearing at the House of Representatives Tuesday, Trade and Industry Secretary Ramon Lopez said in his opening statement that the department supports the modernization of incentives as proposed in the TRAIN 2.
“DTI supports the proposed reforms on the existing incentive regime making it more modern, relevant, responsive, competitive, pro-business, and pro-investments. We adhere to the principle that the incentives to be provided by the investment promotion agencies (IPAs) will be focused, time-bound, performance-based, and transparent,” said Lopez.
He also revealed that the DTI has agreed to create a Strategic Investment Priorities Plan (SIPP) to identify preferred areas of investment activity to be led by the Board of Investments (BOI).
The DOF seeks to create a single, unified list of preferred economic activities that will be granted incentives by the government through the SIPP to be implemented nationwide.
“We welcome the expansion of the available incentives to include a menu which will be more useful for project proponents pursuing strategic and socially-relevant projects rather than offering income tax holiday (ITH) as a one-size-fits-all tool for attracting investments from across different sectors,” said Lopez, who is also the BOI chairman.
The trade chief likewise supports the proposal to remove the nationality requirement and bias for exports activities to qualify for tax perks.
“What is important is that jobs created here in the Philippines for the Filipino people, regardless of the ownership or market to be served. Markets for goods are already contestable under our free trade agreements,” he said.
On the other hand, Lopez cited inputs and recommendations from stakeholders for the TRAIN 2 which include the following:
* Preserving a one-stop shop character of the PEZA and IPA transactions;
* Putting a cap or harmonizing the tax rates and fees which the local government units can impose;
* Reasonable duration and modality to allow current investors enjoying the 5-percent gross income earned to transition to the new regime;
* Clarifications on the application of value-added tax exemptions, zero-rating, and refund systems on inputs across locators, and on constructive exports;
* Longer transition period or continued conditional and performance-based incentives for purely export-oriented efficiency seeking projects, especially as these can easily relocate to another country;
* The role and composition of Fiscal Incentives Review Board and the DOF; and
* Power of the President to negotiate incentives beyond the menu of TRAIN 2 for highly desirable projects.
“The DTI and the Department of Finance are closely collaborating to provide a unified impact to the drafting of a bill an in engaging the different stakeholders all over the country,” Lopez said.
“The current status of our discussions with the DOF are not yet translated into specific provisions in the bills, and hence we are looking forward to the public hearings as this will be a venue to provide greater details and clarifications to the provisions and submission of proposed changes, statements, positions, and data supporting TRAIN 2,” he added.
He also requested lawmakers that a Technical Working Group (TWG) related to TRAIN 2 be created, the DTI should be part of the TWG.
Meanwhile, Lopez highlighted that for every PHP1-tax incentive that the government provided to BOI-listed companies, these firms generated PHP2.3 billion worth of taxes paid to the government during the ITH availment.
He added that based on a 10-year projection of BOI, ITH provided by the government to BOI-registered firms will amount to PHP52 billion, but the government will be collecting PHP300 billion as tax revenues from these companies. (PNA)
