DOF seeks public database of firms enjoying incentives

MANILA, Philippines — The Department of Finance (DOF) wants to make available to the public a database of firms that enjoy tax perks, as well as the foregone revenues incurred by the government due to the grant of incentives, a top official said.

Finance Undersecretary Karl Kendrick Chua said this was included in the amendments proposed by the DOF to the Tax Incentives Management and Transparency Act (TIMTA), as part of the second package of the Comprehensive Tax Reform Program (CTRP).

“We propose that the names of firms receiving incentives be made public, including the amount of their incentives and contributions to society,” Chua said during a recent hearing of the Senate ways and means committee on the bill seeking reforms in corporate taxation.

TIMTA or Republic Act 10708 has allowed the government to monitor and measure the fiscal incentives it is administering to local companies.

According to Chua, there is a need to further improve TIMTA and make incentives more transparent to inform regular taxpayers who are benefiting from their tax payments.

He said as one enjoys tax perks, others pay for it in terms of higher tax rates.

In 2016 alone, Chua said 3,102 corporations paid discounted corporate income tax (CIT) rates ranging from six to 13 percent, while 90,000 small and medium enterprises (SMEs) paid the regular CIT of 30 percent.

The DOF is pushing for the Congressional passage of the administration’s second CTRP package, which seeks to reduce the country’s corporate income tax rate of 30 percent, while rationalizing the government’s fiscal incentives system.

Chua said the government must stop granting hundreds of billion of pesos yearly to only a select group of companies, specifically if they are already profitable or enjoying such perks for decades already.

“We recognize the value of incentives as a key component of a country’s policy toolkit. We assert, however, that incentives should not be given indiscriminately at the expense of building up our more powerful attractions: first, a skilled and hardworking talent pool that needs sufficient human capital investments, second, an ambitious infrastructure development program that requires fiscal commitment, and third, a sizable SME community that deserves to be treated fairly,” Chua said.

The undersecretary, however, clarified that incentives would not be removed, and would only be redirected to industries that are proven to be beneficial to the economy.

“We will continue to support firms or activities that are priority with tax incentives that are performance-based, targeted, time-bound, and transparent,” Chua said.

Finance Secretary Carlos Dominguez earlier expressed hope that the Congress could pass CTRP’s Package 2 soon enough, in consideration of President Duterte’s appeal to approve the measure within the year.