Metro Manila (CNN Philippines, September 5) — The Department of Finance (DOF) is eyeing a regular review of tax incentives given by government to companies.
In a statement, the agency said Finance Secretary Carlos Dominguez is looking to implement the review of tax exemptions every two years similar to the biennial review of all mining firms in the country by the Mining Industry Coordinating Council.
“Every peso granted as a tax incentive is a peso off the budget that could have otherwise been spent on infrastructure, health, education or social protection programs that benefit all, and not just for a few,” Dominguez was quoted as saying.
“It thus behooves the government to perform a regular audit of these companies to see if these beneficiary-firms have indeed made use of their incentives to make an overwhelmingly positive impact on society. Otherwise, the government would not be doing its job of finding out on a regular basis if these incentives are being put to good use by the favored companies,” the secretary added.
Incentives currently enjoyed by businesses located within ecozones and preferred industries include income tax holidays and discounted tax rates which do not expire, the DOF has said.
The country gave away over ₱1.12 trillion in tax exemptions from 2015 to 2017 alone, which was enjoyed by 3,150 companies, according to DOF data.
The amount is more than twice the current budget of the Department of Public Works and Highways, which is at the forefront of the administration’s ambitious infrastructure program.
The DOF earlier said that the Philippines is the lone major economy in the world that grants incentives to companies in perpetuity. Other Southeast Asian countries like Thailand, Malaysia, Vietnam, and Indonesia have a cap of 5 to 25 years in granting the incentives.
The House of Representatives on Wednesday approved on second reading the second tax reform package, which trims corporate taxes and updates fiscal incentives
Once enacted, the proposed Corporate Income Tax and Incentives Reform law will trim the corporate income tax rate from 30 percent to 20 percent over 10 years, while reducing tax breaks for investors. The DOF said this is expected to make the Philippines a more viable investment destination, as the country currently imposes one of the highest tax rates in Asia.
The bill would also create a uniform tax incentives package for all kinds of investments and would set a limit as to how long businesses can enjoy tax discounts.
