THE proposed Investment and Incentives Code, which was originally introduced in the 15th Congress, is now pending before the 17th Congress. Also known as House Bill 4547, the proposed measure was filed on Nov. 29, 2016, and it has remained unacted upon at the House of Representative’s committee on trade and industry since last Dec. 7.
A substitute bill approved by the committee on ways and means, it was approved subsequently on 2nd and 3rd readings, and was transmitted to the Senate, where it was not acted upon, according to Rep. Maximo Rodriguez, Jr., the bill’s principal author. In the bill’s explanatory note, he said, HB 4547 “seeks to streamline the tax breaks for businesses, in order to maximize the use of available funds, and not to abuse the incentives given by the government by stopping the practice of having perpetual perks for several industries.”
If signed into law, the bill would also grant tax breaks to exporters and limit to four years the income-tax holiday for local enterprises. “Further, this bill will also provide for an investment policy that will improve the country’s investment programs and strategies, but, at the same time, ensuring that no industry will unjustly benefit from the incentives that will be provided,” Rodriguez added. “In view of the foregoing, early passage of this bill is earnestly sought.”
The bill, meanwhile, tasks the Board of Investments (BOI) to implement the proposed law’s provisions. Under the bill’s Section 8, one of the functions of the BOI Board of Governors is to “[f]ormulate an evolving National Framework for Investment Promotions (NFIP) and promulgate its rules, regulations and policies that will govern all Investments Promotion Agencies (IPAs).”
Another function is to “[f]ormulate an evolving National Framework for Industrial Development (NFID) and promulgate its rules, regulations and policies in consultation with the private sector.”The NFID shall also identify key industries that would enhance the country’s competitiveness, including, among other factors, research and development, agricultural technology, biomedical devices and systems, renewable energy, logistics and information communications, and technologies.
Another function of the BOI Board of Governors is to establish the i-PAC, or Investment Promotion Action Center. i-PAC, whose coordinator would be the BOI, shall serve as the link among all government agencies to facilitate entry, retention, expansion, and diversification of investments. A number of government agencies—Securities and Exchange Commission, Bureau of Internal Revenue, Bureau of Customs, Bureau of Immigration, Department of Trade and Industry, Dept. of the Interior and Local Government, Dept. of Agriculture, Dept. of Environment and Natural Resources, Dept. of Labor and Employment, Dept. of Foreign Affairs, Dept. of Energy, Dept. of Public
Works and Highways, and Dept. of Agrarian Reform—shall compose the i-PAC. They may include other agencies as determined by the BOI Board of Governors. Among the powers and functions that the i-PAC would have include providing “advice, guidance, information and procedure on various laws, rules and regulations governing investments and the conduct of business” in the country; recommending “streamlining of existing procedures to ensure that all frontline agencies, dealing with the operation of business enterprises, shall perform their tasks for identified transactions between the government and their enterprises.”
Another bill filed on Oct. 12, 2016 and also pending with the same House committee, meanwhile, is seeking to amend the FIA, or Foreign Investments Act, of 1991. Republic Act No. 7042, also known as the FIA, was enacted to attract investments from foreign sources, with an end-view to expanding livelihood and employment opportunities for Filipinos.
This according to Rep. Arthur Yap (3rd District, Bohol), principal author of House Bill 4067, in the bill’s explanatory note. But he said there are two provisions in the FIA that appear to be in conflict with its objectives. He was referring to a provision in connection with the practice of all professions which, according to the explanatory note, is included on the Foreign Investment Negative List (FINL) under “No Foreign Equity.”Yap said, “Considering that certain laws governing each profession allow foreign nationals to practice in the Philippines under reciprocity arrangements, it is misleading to include such item in the FINL as a nationalized activity.
He also said this turns off foreign professionals, “who would otherwise be allowed to practice here by virtue of reciprocity, from coming in and sharing their ideas and technical know-how, contrary to the inclusive policy of the FIA.” The FIA does not apply to financial institutions that are regulated by the General Banking Act and other laws under the supervision of the country’s central bank, Bangko Sentral ng Pilipinas.
If the bill is signed into law, the FIA would be amended to state that it shall not apply to the practice of professions as well. The bill also seeks to amend the FIA by reducing to 15 from 50 the number of Filipinos which non-Filipinos must directly employ in order to be allowed to invest in small- and medium-sized local market enterprises.
Also, the FIA allows non-Filipinos to invest in domestic SMEs, with a minimum paid-in capital of $100,000 if they employ at least 50 employees directly. He explained, however, that a $100,000-enterprise is just a little over P4.3 million and, therefore, cannot immediately sustain a labor force of 50. He said, “Hence, there is a need to retain the employment requirement, but lower the threshold to a more reasonable number.”