The Department of Finance (DOF) yesterday said the Fiscal Incentives Review Board (FIRB) being proposed in a pending tax measure is necessary to advance the public interest in the granting of tax perks to private corporations.
Under the Corporate Income Tax and Incentives Rationalization Act (CITIRA), the FIRB will approve tax incentives for private businesses.
The DOF said in a statement the FIRB is already an existing interagency committee, chaired by the DOF, which grants tax subsidies to government-owned or -controlled corporations (GOCCs)
CITRA expands FIRB’s coverage to include approval of tax incentives.
FIRB will also serve as the oversight body for the country’s 13 existing investment promotion agencies (IPAs) to ensure registered business enterprises receiving tax breaks subsequently deliver the jobs and investment they had promised when they sought such fiscal incentives from their respective IPAs.
“The FIRB is designed to promote the Filipino people’s interests by ensuring two things: first, that incentives granted will lead to the creation of more jobs for Filipinos; and second, that opportunities to apply for incentives are made available to micro, small and medium enterprises (MSMEs), many of which are currently unaware that they can apply for such tax incentives,” said Karl Kendrick Chua, DOF undersecretary.
Chua said under the current system, the 13 IPAs in the country are largely autonomous, each with its own mandate, menu of tax incentives and authority to grant those incentives largely without the approval or knowledge of the DOF.
“The system of having different packages of incentives and processes, as well as autonomous approval points, have created confusion among potential investors and reduced accountability in the grant of tax incentives,” Chua said.
“To promote fairness in the tax system, CITIRA not only seeks to harmonize the package of tax incentives, but to also put more order, clarity, and accountability in the process of granting incentives through the FIRB,” he added.
The DOF said while 3,150 corporations now pay discounted corporate income tax (CIT) rates of six to 13 percent, almost a million small and medium-sized enterprises (SMEs), which employ a majority of Filipino workers, pay the regular CIT rate of 30 percent.
“Promoting good governance in granting incentives through an oversight body is not a new idea. Other countries have been doing that for decades now. The Philippines actually tried creating an oversight body two decades ago,” Chua said.
Chua said the FIRB will promote three principles: transparency, accountability and participation.
“Following international best practices, the FIRB will ensure the process in granting incentives is transparent and that Congress and the Filipino people may access information as to who receives incentives and how much the economy benefits from this,” Chua said.
“This will help the FIRB ensure that businesses receiving incentives actually deliver the jobs and investment that they had committed to when they first applied for special treatment,” he added.
Chua said moving forward, the FIRB will also conduct regular monitoring and evaluation to assess the performance of businesses receiving incentives against their promises to the Filipino people.
“In case they fail to meet their employment, investment, and other targets, incentives may be withdrawn and put to better use,” Chua said.
“The FIRB will also promote the participation of a broader range of businesses by ensuring that the single and generous package of incentives under CITIRA is clearly communicated to a wide range of potential investors, especially Filipino MSMEs,” he added.
