BOI to review Smart, Globe 3G incentives

The third generation technology (3G) expansion projects of both Globe Telecom and Smart Communications approved by the Board of Investments (BOI) in May as pioneer investments in the telecommunications sector may be headed for a review following the Department of Finance’s recommendation to the Department of Trade and Industry that "domestic service-oriented firms should not be entitled to fiscal incentives."

Under an agreement to coordinate the grant of fiscal incentives, the DTI and the BOI must first send to the DOF details of all projects seeking incentives with the BOI.

BOI registration entitles projects to fiscal perks such as income tax holidays and duty-free importation of capital equipment.

However, in an effort to consolidate the country’s fiscal position, the DOF has been tasked to review project proposals and determine if a project deserves the grant of incentives. The DOF then makes a recommendation to the BOI, whose board then makes the final decision.

The approval of Globe and Smart’s 3G expansion projects appeared to have triggered the DOF-DTI/BOI’s "coordination" effort. No less than Trade and Industry Secretary Peter B. Favila had hinted that the approval of the 3G expansion projects were not yet final since they had not been granted registration.

The BOI board approved Globe’s P5.48 billion and Smart’s P33.1 billion infrastructure projects on a pioneer status due to the sheer magnitude of the investments.

The BOI registration of Globe and Smart’s infrastructure investment for their 3G cellular mobile telephone system would entitle them to income tax holiday (ITH). However, the ITH would only apply to the income generated by Globe and Smart for their 3G services and would not apply to their previous investments and existing services. The BOI had imposed certain conditionalities to ensure that only income derived from 3G services are entitled to ITH.

Government, however, admitted that it does not have the technology nor the expertise to determine exactly what portion of the phone firms’ income would be from their 3G services.

Aside from Globe and Smart, Sun Cellular has also been issued a 3G license by the National Telecommunications Commission (NTC).

The 3G technology allows subscribers to enjoy video services, faster mobile internet connection and a host of other content and applications on their mobile phones.

The DOF has said that government has foregone some P10 billion in revenues due to various incentives given to projects that "would have come in anyway."

DOF sources confirmed that they made the policy recommendation to the DTI, the same policy presented to the Senate during a hearing on the incentives issue.