Senate passes bill on monitoring, evaluating tax incentives granted to private sector
June 9, 2015 at 13:59
Moving to strengthen the country’s investment -related laws, the Senate today passed a measure geared towards promoting greater transparency and accountability in the grant and administration of tax incentives to business entities, individuals and corporations.
Senator Juan Edgardo “Sonny” Angara, chairman of the Senate Committee on Ways and Means and sponsor of Senate Bill No. 2669, known as the Tax Incentives Management and Transparency Act (TIMTA), said the proposed measure sought to provide a solution for the lack of empirical data on fiscal incentives, thus enabling the government to “evaluate and maximize revenue spent towards boosting the country’s economic growth.”
Senate Bill No. 2669 was a consolidation of bills authored by the measure’s co-sponsors, Senate President Franklin Drilon and Senate Pro Tempore Ralph Recto.
According to Drilon, the main purpose of the bill is to “make public and let the sun shine on the tax incentives which companies enjoy.”
“There should be transparency on the taxes that we are not collecting and waiving in the form of incentives granted to the private sector, so that we will see whether indeed, the public is best served by these incentives being granted to them,” he said.
Drilon said the TIMTA was one of the two key economic reform bills – along with the Fair Competition Act – that both houses of Congress had agreed to pass and submit for signing to President Benigno Aquino III before they go on sine die adjournment on June 11.
Tracking, shedding light on tax incentives
Under the bill, the data and information related to the tax incentives claims of the registered business entities and the actual amount of tax and duty incentives granted which are submitted by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) to the Department of Finance (DOF) shall be maintained by the DOF under a single database for monitoring and analysis of tax incentives granted. “Aside from monitoring tax incentives granted by investment promotion agencies (IPAs) and other government agencies, the database would help the government project tax incentives for future years and to conduct an annual evaluation studies on the impact of tax incentives to the nation’s economic performance,” Angara said. Following the committee amendments on the bill introduced by Angara, the DOF will be mandated to submit to the Department of Budget and Management (DBM) the following data: “(a) actual amount of tax incentives availed by registered business entities, (b) estimate claims of tax incentives immediately preceding the current year, (c) programmed tax incentives for the current year, and the (d) projected tax incentives for the following year.” For transparency purposes, these data and information will be reflected by the DBM in the annual Budget of Expenditures and Sources of Financing (BESF), which shall be known as the Tax Incentives Information (TII) section, and will be submitted to the President and the heads of the committees on appropriations and finance in both houses of Congress.
Annual analysis by NEDA
Another committee amendment to the bill mandated the annual conduct of cost-benefit analysis by the National Development Authority (NEDA) on investment schemes incentives to determine the impact of tax incentives on the economy.
This would empower the NEDA to collect and evaluate tax incentives data collected from the reports of the DOF, BIR, and BOC, along with investment-related data such as lists of registered business entities, investment projects, investment cost, actual employment and export earnings.
Angara explained that the NEDA’s cost-benefit analysis would “allow policymakers to make better decisionsin crafting or revising laws, overseeing the implementation of existing investment-related laws, and managing the nation’s finances.” No diminishing of tax incentives granted
Recto, for his part, allayed fears that the bill would tamper with the fiscal incentives presently enjoyed by the private sector, and stressed that the TIMTA should instead focus on promoting transparency and accountability.
“This bill will not appropriate tax incentives availed; it merely requires that they be accounted for. It does not rescind nor recall any investment perk; it just obliges companies and the government to record and report the same,” Recto said.
Under the bill, “nothing in this Act shall be construed to diminish or limit, in whatever manner, the amount of incentives that IPAs may grant, pursuant to their charters and existing laws.” Angara said that instead of diminishing the powers of IPAs to grant incentives, the TIMTA was pushed “to strengthen the belief and confidence of investors and businesses in the government’s ability to set a clearer and more efficient supervision of fiscal incentives.”
“This way, we will convince them to invest more and bring more businesses to our country, thus providing more opportunities and jobs for our countrymen,” he concluded.
