Senate passes Tax Incentives Management and Transparency Act

 

MANILA, Philippines – The Senate on Monday, June 8, passed the Tax Incentives Management and Transparency Act (TIMTA), a measure geared toward 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, also sponsored TIMTA or Senate Bill No. 2669, a consolidation of bills authored by the measure’s co-sponsors, Senate President Franklin Drilon and Senate Pro Tempore Ralph Recto.

Drilon said 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. 

TIMTA and the Fair Competition Act are two of the key economic reform bills that both houses of Congress had agreed to pass and submit for signing to President Benigno Aquino III before they adjourn on June 11.  

What’s TIMTA?

Under the TIMTA bill, the data and information related to the tax incentives claims of 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.

Angara said the database would help the government project tax incentives for future years and to conduct an annual evaluation on the impact of tax incentives on the nation’s economic performance. It would also help government monitor tax incentives granted by investment promotion agencies (IPAs) and other government agencies.

Per the committee amendments, DOF will be mandated to submit to the Department of Budget and Management (DBM) the following data:

• Actual amount of tax incentives availed by registered business entities
• Estimate claims of tax incentives immediately preceding the current year
• Programmed tax incentives for the current year
• Projected tax incentives for the following year

For transparency purposes, the 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. It will be submitted to the President and the heads of the committees on appropriations and finance in both houses of Congress. 

Cost-benefit analysis

Another committee amendment to the TIMTA bill mandated the annual conduct of cost-benefit analysis by the National Economic and Development Authority (NEDA) on investment schemes in a bid to determine the impact of tax incentives on the economy.

NEDA’s cost-benefit analysis would “allow policymakers to make better decisions in crafting or revising laws, overseeing the implementation of existing investment-related laws, and managing the nation’s finances,” Angara explained.

The amendment also aims to empower NEDA to collect and evaluate tax incentives data 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.

Nothing to fear

Recto allayed fears that the bill would tamper with the fiscal incentives presently enjoyed by the private sector.

“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.

He added that 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.”

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,” Angara said.

“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 added.

House version

On June 4, the House of Representatives approved, voting viva voce, its own version of TIMTA, with only several “minor” changes based from the agreed-upon version by the Finance and Trade departments in May.

The Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA) are the investment promotion agencies that grant incentives to export firms to boost industries and lure in investors.

House Bill No. 5831 covers all businesses with income-based tax incentives, like income tax holidays and a 5% tax on gross income earned, in place of other taxes.

HB No. 5831 author Camarines Sur 3^rd District Representative Maria Leonor “Leni” Robredo also repeatedly assured investors that they have “nothing to fear.”

The provision that requires the automatic publication of all data on the tax incentives claims of companies was removed during the period of amendments, House committee on ways and means chairman and Marikina 2^nd Representative Romero Federico “Miro” S. Quimbo said.

Quimbo said the change was made due to current confidentiality rules. The incentives data though will still be published by DBM in a consolidated format.

The TIMTA would have to be approved by the House on third reading and be reconciled with the Senate’s version.

On May 31, Philippine business groups and the Joint Foreign Chambers (PBG-JFCs), a coalition of 14 local and foreign business groups, wrote the House and Senate committees on ways and means to express support for TIMTA.

The business groups, whose memberships total nearly 35,000 firms and individuals, lauded the objective of the bill to promote transparency and accountability in granting incentives, and submitted recommendations to the congressional committees. – Rappler.com

 

Accountant at work image from Shutterstock