New ‘sticking point’ in DTI, DOF talks on RFI emerges

The renewability of fiscal perks being enjoyed by registered companies has emerged as another “sticking point” in the discussions on the Rationalization of Fiscal Incentives (RFI) bill.

Following President Aquino’s effort to highlight the importance of the bill in his final State of the Nation Address in July, the Department of Trade and Industry (DTI) and the Department of Finance (DOF) have renewed their discussions on the bill that started 16 years ago, when the legislation was first proposed.

While Trade Secretary Gregory L. Domingo has repeatedly said the compromise bill was already 80-percent to 90-percent consolidated, he declined to identify the sticking points.

However, in an interview on Wednesday, Board of Investments (BOI) Executive Director Efren V. Leaño said the renewability of incentives has emerged as another key stumbling block.

According to him, Domingo wants the corporate income-tax (CIT) privilege reduced to no more than 15 years, renewable to another 15 years, subject to the approval of the board of the various investment-promotion agencies (IPAs).

Finance Secretary Cesar V. Purisima, however, wants the 15-year period scrapped altogether.

For the DTI, as long as the company can justify continued enjoyment of incentives, renewing the privilege by another 15 years should be okay, Leaño said in a spot interview on Wednesday.

Leaño, likewise, said the authority to extend the timebound incentives should remain with the DTI, but to be determined by the various IPAs.

In an earlier BusinessMirror report, an initial consolidated draft on the incentives bill was endorsed by the two agencies for exporters, regardless of whether they are registered with the Philippine Economic Zone Authority (Peza).

In the draft, Peza-registered export enterprises have two available packages.  The first package includes a four-year income-tax holiday (ITH), or a reduction from the current six to eight years. The four-year ITH is nonrenewable and nonextendable.

After the ITH’s expiry, companies may be granted either a 5-percent tax on gross income earned (GIE), but they still need to pay value-added tax (VAT) and real-property tax (RPT) for 11 years; or pay 15-percent reduced CIT in lieu of local and national taxes, and still pay VAT and RPT for 11 years.

In the second package, Peza-registered firms—in the absence of an ITH—will pay 5-percent tax on GIE in lieu of local and national taxes except VAT and RPT for 15 years, or 15-percent reduced CIT in lieu of local and national taxes, VAT and RPT for 15 years.

For non-Peza-registered exporters in ecozones and free ports, they either get a 5-percent tax on GIE in lieu of local and national taxes, except VAT and RPT, for a period of 15 years, or pay 15-percent reduced CIT for 15 years.

For exporters outside ecozones and free ports, there are two packages, as well.

In the first package, Peza may allow them to enjoy a four-year ITH, plus a reduced CIT of 15 percent for 11 years.

In the second package, without an ITH, enterprises may enjoy a 15-percent reduced CIT for 15 years, a VAT refund plus duty-free importation of capital equipment and VAT and duty refund on imported raw materials, supplies and semifinished products.

For BOI-registered enterprises, the proposed package is 15-percent reduced CIT for 15 years.

Another point of debate, according to Leaño, is the prospective implementation of the new incentive schemes.

Leano said the DTI’s stand is to allow the registered enterprises to continue enjoying their existing incentive privileges even after the RFI bill has become a law. For the DOF, however, the new scheme should be followed immediately once the law becomes effective. “We will still discuss that.”

The House of Representatives convened a hearing on the RFI just last week. The chairman of the House Ways and Means Committee, Rep. Romero “Miro” S. Quimbo, assures passage of the bill in the lower house by December.

Source: http://www.businessmirror.com.ph/new-sticking-point-in-dti-dof-talks-on-rfi-emerges/