FINANCE Secretary Carlos Dominguez 3rd is pushing for tax perks to be reviewed every two years as he reiterated that the Philippines had been too generous in granting incentives to select companies.
In a statement on Thursday, the Department of Finance (DoF) quoted its chief as saying the government must perform a regular audit of companies receiving tax perks to check if these “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,” he added.
Dominguez stressed that it was necessary to institute a review system similar to that of the Mining Industry Coordinating Council, which has been regularly auditing mining companies every two years since 2017.
Earlier, the Finance department reported that the government recorded an estimated P1.12 trillion of foregone revenues in tax perks awarded to select companies from 2015 to 2017.
These revenues included income tax incentives, tax incentives on customs duties, and tax incentives on import value-added tax given away to 3,150 companies for the three-year period.
In a breakdown, about P301.2 billion in incentives were granted in 2015, P380.7 billion in 2016, and P441.1 billion in 2017.
Among the investment promotion agencies that granted incentives to registered enterprises, the Philippine Economic Zone Authority gave away the lion’s share of tax incentives worth about P879.1 billion, or about 78 percent of the three-year total, the DoF said.
According to the department, the Philippines is the only major economy in the world with a system that grants incentives to companies in perpetuity.
While other countries in the Association of Southeast Asian Nations, like Thailand, Malaysia, Vietnam and Indonesia, have a cap of five, 10, 15 or 25 years for the incentives they grant, some companies in the Philippines continue to receive incentives every year, even after they have been getting them for as long as nearly 40 years already, without any in-depth review of the costs and benefits of the tax incentives given away to them, it said.