Gov’t loses P144 B in 2011 due to tax perks in ecozones

By Zinnia B. Dela Peña (The Philippine Star) | Updated March 27, 2014 - 12:00am

MANILA, Philippines - The government lost at least P144 billion from the income tax holidays enjoyed by domestic and foreign firms in free ports or economic zones in 2011, the Department of Finance said.

The amount accounted for 1.5 percent of gross domestic product (GDP), 9.3 percent of government’s total expenditures and 10.6 percent of state revenues in 2011.

These figures, the Finance Department said, were conservative as the Tax Expenditure Report covered only 29 percent of all investment promotion agency – registered firms.
“With the current tax incentives system that has been largely unaccounted and uncoordinated, the government loses billions of pesos in revenues every year which could have helped improve our fiscal position,” Finance Secretary Cesar Purisima said as he urged lawmakers to speed up the approval of key economic reforms particularly the fiscal incentives rationalization bill that has been pending for more than 15 years.

The bill, which has been certified a priority measure by the Aquino administration, aims to establish a transparent and accountable system for the grant of incentives.

It seeks to remove various incentives granted to businesses that are deemed either excessive or no longer necessary as the government aims to achieve sustainable inclusive growth.

 

Internal Revenue commissioner Kim Henares earlier said the government would generate as much as P19 billion in additional revenues with the rationalization of tax breaks.

Purisima is also pushing for the immediate passage of the Tax Incentives Management and Transparency Act (TIMTA) and the Fiscal Incentives Rationalization Reform (FIR) bill.

The TIMTA will give the government the necessary tools to account for the magnitude of government support given to a certain sector and the appropriateness of using tax incentives in achieving socioeconomic goals while the FIR coordinates and organizes the grant of incentives to different sectors that has been largely unfettered over the last few years.

“Tax incentives distort the tax structure of the Philippine economy. Through these twin fiscal incentives reform measures, in the long term the government will enhance the country’s fiscal capacity to continue to build on its macroeconomic fundamentals, level the playing field and improve competitiveness and investment opportunities. Accounting for tax incentives needs to be transparent, and these tax incentives need to be granted properly,” Purisima said.