Rationalizing Incentives
The House Ways and Means Committee has finally reported out HB 5241 (Committee Report 1332), a bill rationalizing the administration of incentives. The bill seeks to create a sound national investment policy that will spur investments into the country while addressing the issue of revenue leakages due to overly generous incentives given to investors.
The House leadership committed it to be passed on third reading before session adjourned last 10 October 2008, and the committee report was filed on 20 September, ten months since the first public hearing conducted last 20 November 2007. The measure was identified a priority by the Legislative-Executive Development Advisory Council (LEDAC) in their meeting last 7 August 2007.
The measure has since been filed and is being re-filed since the issuance of Executive Order 226 or the Omnibus Investments Code in 1987. During the 13th Congress, a measure was approved by the House through HB 3295. SB 2411, the Senate counterpart, however, remained pending on second reading until the session adjourned.
Under the proposed measure, the Board of Investments (BOI) shall be responsible for the promotion as well as the regulation of investments. BOI shall formulate an evolving National Framework for Investment Promotion (NFIP) that will govern all investment promotion agencies (IPAs). This will be carried out through the Investment Promotion Action Center (i-PAC), which will replace the current One Stop Action Center (OSAC).
The i-PAC shall be the source of investment information providing guidance and procedure on various laws, rules and regulations governing investments and doing business in the country. It shall coordinate with government agencies to facilitate entry, retention, expansion and diversification of investments and shall ensure that all investment-related requirements are acted upon within ten working days.
Nevertheless, the Investment Priorities Plan (IPP) is still being prepared by the BOI. Listed industries, services and other economic activities covered must be covered by the current Medium Term Philippine Development Plan (MTPDP) and Medium Term Philippine Investment Plan and must satisfy specific qualification requirements for a particular sector. Preferred activities must satisfy the following conditions: (1) substantial amount of investments; (2) considerable generation of employment; (3) use of modern or new technology; or (4) installation of adequate environmental protection systems. However, conditions 1 and 4 must be present in all activities and that the threshold amount of investments and employment generation required for a specific activity shall be subject to a periodic review every three years.
The President may allow registration of a strategic project that may not be listed in the IPP, but will locate in the country as a result of stiff competition with other countries.
Incentives Menu
Incentives are government subsidies usually given to investments that result to social benefits such as employment generation, increasing exports, tax generation, development of poor provinces and care for the environment. However, with over 146 different tax incentive laws covering almost all types of activities, a number of enterprises are considered recipients of redundant incentives resulting to actual loss in government revenues.
While there is a provision honoring existing contracts and agreements that have already been and are being undertaken, it seeks to repeal inconsistent provisions of exisisting laws. However, there is also a survivor clause, which enumerates several laws whose provisions pertaining to the grant of incentives shall continue to have full force and effect.
HB 5241 proposes a consolidated list of fiscal incentives for qualified enterprises:
click to view the matrix of incentives
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