THE Israel Chamber of Commerce of the Philippines (ICCP) said the government must put on hold its plan to rationalize corporate fiscal incentives as it may be ill-timed to go ahead with it at this point.
ICCP President Itamar Gero said in a statement on Wednesday the timing may be too soon to overhaul the current investment regime which the chamber believes is one of the most competitive advantages the Philippine has in attracting investors.
“The thing is you started with something and now you are changing the rules of the game. They are looking to mitigate the tax incentives they are giving by taxing harder on specifics. You have to do your math, you have to choose your battles,” Gero said.
“Every action, there is a reaction and it is not the right time. I am sure every sector will defend itself. When the investment momentum is at its peak, then the Philippine government can think about sunsets on those incentives,” he added.
Israeli companies supposedly want to see stability in government regulations and financial incentives before investing in the country.
“Israeli companies would look for the stability and the transparency in taxation and regulation, because when Israeli investments are coming here they will not be small investments. These are investments that will require long-term stability and we want attractive incentives to be sustained,” he said.
In August, Sen. Franklin Drilon has filed Senate Bill 229, otherwise known as the “Act of Rationalizing the Grant and Administration of Fiscal Incentives and for Other Purposes,” which aims to streamline incentives being given by Investment Promotion Agencies (IPA) in the country.
“The incentives provided under the proposed measure may be granted by the IPAs to the Registered Enterprise to the extent of their registered activities. Income derived from non-registered activity or project shall, thus, be subject to appropriate taxes under the National Internal Revenue Code, as amended,” the bill’s explanatory note stated.
Primarily affected by the bill are incentives granted to companies located in economic and freeport zones.
Currently, companies located in Philippine Economic Zone Authority (PEZA) zones enjoy a preferential 5-percent tax on gross income earned (GIE) after a four year income tax holiday (ITH).
If the bill is passed, PEZA locators, after four years will either get 5 percent GIE for the next 11 years in lieu of all national and local taxes, except value-added tax (VAT) and real property tax (RPT) or 15 percent corporate income tax (CIT) for 15 years in lieu of all national and local taxes.
The 15-percent CIT will also be used on all companies registered with the Board of Investment as they will no longer enjoy any form of ITH.
All fiscal incentives will then become renewable as determined by the government.
The government has stated in the past that sunset provisions on tax incentives must be placed as it cannot forever subsidize investment activities in the country.
The ICCP, looking to have more than100 member companies next year, is one of the fastest growing business chambers in the country.