The Department of Justice (DOJ) has affirmed the authority of the president of the country to grant fiscal and non-fiscal incentives to “highly desirable” private sector projects, with or without endorsement by the fiscal incentives board.
In a recent legal opinion released over the weekend, Justice Secretary Jesus Crispin Remulla responded to a query by Finance Secretary Ralph Recto on the scope of presidential authority under Section 301 of the National Internal Revenue Code.
Recto had flagged a private sector project costing more than P50 billion, which applied for Philippine Economic Zone Authority (PEZA) registration and incentives, and sought additional support, such as power and transmission discounts, water access and substation construction.
While the Fiscal Incentives Review Board (FIRB) endorsed the project subject to legal guidance, the DOJ said the president is, indeed, empowered under Section 301 to grant incentives independently.
Remulla wrote in his July 8 opinion: “We agree … the foregoing explicitly authorizes the president to grant incentives to highly desirable projects without the need for a recommendation from the FIRB.”
However, Remulla emphasized that while FIRB’s recommendation is not legally required, its determinations — over which projects are considered “highly desirable,” the incentive caps, and performance targets — should guide the president’s decision.
The DOJ also concurred with the Finance Department’s view that the president
may extend power discounts under the same provision of the tax code.
n a related clarification, the DOJ held that the Power Sector Assets and Liabilities Management Corp. (PSALM) cannot act as a retail electricity supplier, stating this function is neither expressed nor implied under the Electric Power Industry Reform Act (EPIRA).
Remulla also maintained that budgetary support to qualified private entities does not violate equal protection, so long as it does not involve clear and intentional discrimination.
“Incentives granted to qualified investment projects constitute a pact with government, aimed at promoting economic efficiency and development,” he said.
