THE Department of Finance (DoF) signaled its intent to curb the granting of tax incentives, releasing an estimate that such “giveaways” cost the government about P1.2 trillion between 2015 and 2017.

The DoF said in a statement that foregone revenue from incentives amounted to P1.2 trillion in the three years to 2017, granted to 3,150 companies and ranging from tax breaks on customs duties and value-added tax.

“To put things in the right perspective, the P1.12 trillion that we gave away in incentives over that three-year period is over twice the current [P549.4-billion] budget of the Department of Public Works and Highways (DPWH),”Undersecretary Karl Kendrick Chua was quoted as saying in the statement.

The DoF estimated that around P301.2 billion worth of incentives were granted to companies in 2015, P380.7 billion in 2016, and P441.1 billion in 2017.

The Philippine Economic Zone Authority (PEZA) accounted for P879.1 billion, or 78% of the P1.2-trillion total.

According to Mr. Chua, Package 2 of the Comprehensive Tax Reform Program (CTRP) will address this issue by implementing a “fair and more accountable incentive regime.”

President Rodrigo R. Duterte during his fourth State of the Nation Address (SONA) urged the 18th Congress to pass the remaining packages of CTRP by the end of 2019.

Package 2 of CTRP includes an overhaul of tax incentives and the gradual reduction of corporate income tax to 20% from 30% by 2029.

Mr. Chua has said that he hopes to pass the remaining tax reform measures by the end of the year.

While tax incentives increased direct investment flows which consequently generated more jobs, he said there is a need to “modernize” the incentive regime and make it as “performance-based, time-bound, targeted and transparent.

The government has so far passed Republic Act (RA) No. 10963, which slashed personal income tax rates and increased or added levies on several goods and services; RA 11213; the Tax Amnesty Act of 2019 which granted an estate tax amnesty and an amnesty on delinquent accounts that remain unpaid even after final assessment; and RA 11346, which will gradually increase the excise tax rate on tobacco products to P60 per pack by 2023 from P35 currently.

“The proposal under Package 2 does not eliminate incentives… [But] we need to make sure that the companies who get to enjoy these incentives truly help us achieve inclusive development,” he said. — Beatrice M. Laforga

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