BOI seeks menu of tax perks under CTRP
The Board of Investments (BOI), the government’s premier investment generating agency, has proposed a menu of effective incentives for specific strategic industries, removal of the exports and nationality bias on investments and incentives for contestable market as they backed the Duterte administration’s push to cap the country’s fiscal incentives regime under the second package of the comprehensive tax reform program (CTRP).
Trade and Industry Undersecretary Ceferino S. Rodolfo, who is also BOI Managing Head, said the menu of incentives will be more effective in helping an investor make his project more viable and profitable.
The menu of incentives will be put under the proposed Strategic Investment Priorities Plan, which will serve as basis of what kind of industries will be eligible for certain fiscal perks. It will become the rule book among various incentive-giving bodies of the government, including BOI and the Philippine Economic Zone Authority and other agencies that also grant incentives under special laws.
Some of these incentives would include net operating loss carry over (NOLCO), accelerated depreciation, double tax deduction on expenses for training of personnel, 5 percent tax on gross income earned and income tax holiday, among others.
“TRAIN 2 is more lib-
eral and you are not constrained to avail of the fixed incentives,” he said.
For instance, Rodolfo explained that an income tax holiday may not be effective for a project that is not expected to earn on the first few years of operation. NOLCO or an accelerated depreciation tax perks maybe more appropriate for this particular project. The government is looking at extending NOLCO from three years to seven years.
On the removal of export and nationality bias in the grant of incentives, Rodolfo said there should be no distinction between a foreign or local investor and there should be equal treatment for export-oriented or domesticoriented projects.
“What is important is that the business is and generating jobs for Filipinos,” said Rodolfo.
At present, for a foreignowned company to enjoy tax incentives it should export at least 60 percent of product and only 30 percent for the local market. This was a dilemma for one big multinational company as it can only start exporting on the 6th year yet of operation.
On the 5 percent GIE, which is being offered by the Philippine Economic Zone Authority (PEZA), Rodolfo explained that the government is looking at trimming it down to 5 years only from the current open ended scheme.
Those enjoying the GIE will be given a transition period, but those already enjoying the tax perk for 20 years may not be eligible for transition anymore because the GIE is granted only to new product registration. Rodolfo said that if a company has been producing the same product for the past 20 years, then that product maybe obsolete already.
But he raised the possibility of longer ITH for companies that continue to register innovative products. At present, the ITH can be availed for a maximum of 8 years.
To further help the BPO sector, which most important resource is human talent, the BOI would like to make expenses for training of workers a direct cost making the outsourcing company eligible for double tax deduction for training expenses when it pays its corporate income tax.
To sweeten up the deal, the government is also looking at reducing the corporate income tax from the current 30 percent to 25 percent.
According to Rodolfo, the Department of Finance has also agreed on a by department composition of the proposed Fiscal Incentives Review Board, an oversight committee, to include DTI, DOF, National Economic and Development Authority and Department of Budget and Management, but not Bureau of Customs, Bureau of Internal Revenue and National Tax Research Council, which are agencies under the DOF.
In addition, Rodolfo said that the FIRB will have no veto power over what incentives giving government bodies have granted to their registered enterprises.
Rodolfo said that the country’s biggest investors, which they believe will be affected by TRAIN 2, are also supportive for the government’s tax reform program.
On criticisms that government agencies including BOI have been generous in giving out incentives to investors resulting in huge tax leakages, Rodolfo said that BOI only grants 50 percent of the incentive availments applied for by its registered enterprises.
“Before these tax incentive availments are processed at the BIR, we have to make our own technical reviews and we already disallow some claims,” he said.
“We are very focused and judicious in approving tax incentive availment.”