SENATE Bill 2669, also known as the Tax Incentives Management and Transparency Act (Timta), was voted favorably on its third reading. This is aimed to promote fiscal accountability and transparency in the grant and management of tax incentives availed businesses.

The bill introduces the concept whereby the incentives administered and implemented by various investment-promotions agencies (IPAs), such as the Board of Investments (BOI), Philippine Economic Zone Authority, Bases Conversion and Development Authority, Subic Bay Metropolitan Authority, Clark Development Corp., John Hay Management Corp., Poro Point Management Corp., Bataan Technology Park Inc., Cagayan Economic Zone Authority, Zamboanga City Special Economic Zone Authority, Philippine Industrial Authority, Aurora Pacific Economic Zone and other government agencies (OGAs) shall be strictly monitored. The amounts of the tax incentives granted to registered business entities shall be reported in the Tax Incentives Information (TII).

In the TII, the aggregate data related to incentives availed of by registered business entities and qualified individuals shall be reported. Once implemented, the registered entities and private individuals shall submit annual report to the respective IPAs and OGAs, where they are registered. In the report, they will have to state the amount of tax incentives availed of for the year and other relevant information that may be required, such as project profile, employment, investments made, and taxes and licenses and fees paid. Annual reports submitted by the registered entities and private individuals shall be consolidated in the TII. The failure of a registered entity or a private individual to file the reportorial requirements shall be a ground for suspension of the incentives being enjoyed for a particular taxable year. The suspension of incentive may be a harsh penalty though. Instead of a suspension, imposition of fines may be reasonable considering that the same information are already available in other reportorial or filing requirements, such as in the income-tax returns and audited financial reports filed with the Securities and Exchange Commission and the Bureau of Internal Revenue.

Meanwhile, the House of Representatives also passed House Bill 5831, which is also titled Tax Incentives Management and Transparency Act. However, unlike the Senate bill, the reportorial requirements imposed upon the registered entities and private individuals are more strict. Unlike the Senate bill, the House bill provides that in order for the registered entities to avail the income-tax holiday and other tax incentives with the BOI and other IPAs, the entity must apply within six months from the statutory deadline for the filing of tax returns. Otherwise, this will result in the forfeiture of the incentives for the same taxable period.

The Timta is part of economic reform which the government is aiming for vis-à-vis public accountability and transparency, since these incentives granted by government promotion agencies constitute loss or reduction from revenue collections. In addition, it will help the government analyze and rationalize the fiscal costs, and to optimize the economic and social benefits of these incentives.

This article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. Atty. Julie Ann L. Aranda is a senior associate of Du-Baladad and Associates Law Offices, a member firm of World Tax Services Alliance. To reach the author of this column: e-mail Atty. Julie Ann L. Aranda at [email protected] or call 403-2001 local 312.

Source: http://www.businessmirror.com.ph/tax-incentives-management-and-transparency-act/