The Department of Finance (DOF) said the government’s income tax holidays should be at par with those of other Southeast Asian nations as the Philippines tries to liberalize its economy further and attract more foreign investment.
In a statement released on Friday, Finance Secretary Carlos Dominguez 3rd said the government has to rationalize its current fiscal incentives program while working on ways to develop a more open economy for foreign direct investment (FDIs).
Dominguez said he has tasked Finance Undersecretary Karl Kendrick Chua to compare the country’s present set of tax breaks with those of the other Association of Southeast Asian Nations (Asean) member-economies.
“We are currently doing a line-by-line comparison between ourselves and our competitors in Asean. Karl Chua is doing this together with some members of our staff, so that we can really compare apples to apples,” he said.
He also disclosed that the DOF is not rushing its fiscal incentives rationalization bill “because we want time to consult, to really think and check what’s going on around the Asean region.”
But with the limited financial government resources, the DOF chief said that profitable business ventures should no longer be subsidized by the government, but should, instead, focus only on industries relevant to the current environment.
The new tax incentives program should address the viability gap, very targeted, and in favor of performance-based types of tax incentives, Dominguez said.
The Secretary added that there must be sunset provisions in granting tax incentives as the government cannot perpetually subsidize investment activities.
“Forty is an important number for us because some of those companies have been here for 40 years,” he said, noting that the Philippines has been unreasonably generous in providing preferential rate on taxes for enterprises.
“When you say those guys [other countries]are giving tax breaks for 25 years… we’ve been at it for more than 40 years. So, I don’t think we’re really behind in providing such incentives,” he said.
The DOF is currently drafting a bill seeking to lower corporate income tax rate to 25 percent, but is at the same time proposing the rationalization of fiscal incentives.