DTI objects to budget for investment perks

Posted on February 01, 2015 06:34:00 PM

SETTING a budget for tax incentives could be damaging to the country’s image, a Trade official said, as a set amount for perks would tie the hands of government should investment levels exceed expectations.

Under House Bill 2492 or the Tax Incentives Management and Transparency Act (TIMTA), a tax expenditure account (TEA) will be created to account for projected incentives that will be handed out by various investment promotion agencies every fiscal year.

The TEA is an automatic appropriation, similar to the allocation for debt servicing. Bill author and Camarines Sur Rep. Maria Leonor Gerona-Robredo (3rd district) has said this would make the monitoring of investment grants easier and transparent — a move backed by the Finance and Budget departments.

However, the Department of Trade and Industry (DTI), the lead agency in attracting investment, registered its objection to the scheme.

“The DTI maintains its reservations to the proposed scheme,” Efren V. Leaño, executive director of the Management Services Group of DTI’s Board of Investments, told lawmakers during a committee hearing at the House of Representatives last week. “This may also cripple the incentive administration of the country and may result to breaches of contract apart from the possible damage to the country’s investment image.”

Finance undersecretary Jeremias N. Paul, Jr. said the budget account would merely serve as a “recording scheme” for tax exemptions and fiscal perks given out by agencies to attract foreign investors, which they see as government’s foregone revenue.

The Finance department will also be tasked with creating a single database of all tax incentives given out for monitoring and assessment purposes, before it will be used as the basis for the incentives projections under the TEA which will be included in the national budget.

Sought for further comment, Mr. Leaño said an executive order — not a law — would be enough to require all investment agencies to submit investment data.

“If they need any data, then we can provide it. What we’re thinking is: why do we have to have a law on that just because you want to get the data?” he said in an interview on the sidelines of the meeting.

Creating the TEA would be effectively putting a limit to the incentives that can be given out, Mr. Leaño added, as investment projections could be greater than expected, leaving the authorities with no choice but to go back to Congress to authorize more perks.

“When you promote (to investors), will you say that we have these incentives but is still subject to what is available? You cannot promote that way,” he said in Filipino. “That’s very difficult. We are running behind the competition and you want to make it even harder for investors.”

“For example, we make a projection and additional investments come in. What will we do? Do we have to go back to Congress just to ask for the difference?”

Finance data show that the Philippines gave out at least P145 billion of incentives in 2011, or about 1.5% of gross domestic product.

The government relies on foreign direct investment to generate jobs and further stimulate the local economy.

The measure is currently with the House of Representatives Committee on Ways and Means, alongside another proposal to make all fiscal incentives uniform. The Finance and Trade departments also have divergent positions on this bill.

Both have been tagged as priority measure by Malacañang and Congress. — Melissa Luz T. Lopez