Revenue loss due to tax perks down to P104B

July 28, 2017 at 13:00

Activities related to the country’s top dollar earners—business process outsourcing and electronics—cornered the bulk of tax incentives given away by the government in 2015 totaling P104.4 billion, latest Department of Finance data showed.

During the public hearing held the Congressional Oversight Committee on Tax Incentives Management and Transparency Act, DOF Director Juvy Danofrata said income tax incentives granted by investment promotion agencies two years ago reached P86.3 billion, of which P53.8 billion were in the form of income tax holiday from six IPAs. This was on top of the P32.5 billion from the special income tax rates given by eight IPAs.

Another P18.1 billion came in the form of duty exemption on imports.

In 2014, foregone revenues due to tax perks were higher at P126.2 billion.

Danofrata said the tax incentives in 2015, exclusive of value-added tax incentives, accounted for 1.5 percent of gross domestic product.

If VAT incentives were to be included as part of investment tax expenditures, another P149 billion in foregone revenue will be added to the 2015 figure, Danofrata said.

The Philippine Economic Zone Authority gave away the bulk of tax perks worth P51.7 billion to 89 registered activities in 2015, followed by the Board of Investments with P28.7 billion, she said.

In terms of sectors, Quirino Rep. Dakila Carlo Cua, citing DOF data, pointed out that the biggest recipients of tax incentives from the government were semiconductors (P30 billion) and BPO (P15 billion).

Semiconductors are the country’s biggest merchandise export commodity, while BPO industry revenues are expected to overtake remittances from overseas Filipinos as the top source of dollars.

Cua, however, noted that the agriculture sector enjoyed only less than P1 billion in tax incentives.

“I’m not questioning why the BPO and semiconductor sectors get big incentives, but why are incentives for the agriculture sector being dwarfed?” said Cua, who co-chairs the joint committee.

“I think there’s a lack of push from the economic managers—they need to put more focus and strongly push the agriculture sector,” Cua said.

Committee co-chair Sen. Sonny Angara also stressed the need to support the agriculture sector amid closer Asean integration, citing that neighboring countries have strong agricultural foundations.

“We need to be able to compete with them in agriculture, an area where we can really provide jobs, strengthen competitiveness and raise incomes, especially in rural areas,” Angara said.

As far as the grant of tax perks is concerned, Angara said “we need to see which industries bring a lot of value-added and how we can strengthen them,” citing that the chocolate and coffee industries are growing globally.

Angara said the fact that the BPO and electronics sectors were among the country’s top growing industries shows that the generous tax incentives being extended to them help them become more competitive.

“But in agriculture, we have to study whether the issue is the lack of promotion or the ineffectiveness of the legislated incentives,” Angara said, noting that investors in the sector may not be availing of tax perks either because they were already profitable or because they would not be profitable even with incentives in place.

Source: https://business.inquirer.net/233971/revenue-loss-due-tax-perks-p104b