(Eagle News) –The Department of Finance (DOF) said Thursday the government loses more than P300 billion annually from the implementation of income tax holidays and other incentives being enjoyed by big corporations.
This, according to Finance Undersecretary Karl Kendrick T. Chua, means there is a need for the rationalization of incentives for investors under the second tax reform package that the DOF will submit to Congress before the end of January.
Based on 2015 data, income tax holidays and special rates account for P86.25 billion of the revenue losses, while custom duty exemptions account for P18.4 billion.
He also said that “exemptions from paying the value-added tax on imports led to P159.82 billion in foregone revenues; and local VAT, P36.96 billion, although part of this tax will eventually have to be refunded because these are imposed on exporters.”
“These incentives totaling P301.22 billion do not yet include exemptions from the payment of local business taxes and the estimates on tax leakages,” Chua added.
According to him, the government “gave away up to 1.5 percent of the gross domestic product (GDP) on average in income tax and custom duties exemptions.”
He said the enactment of the Tax Incentives Management and Transparency Act (Timta) in 2016 has allowed the DOF to track incentives systematically.
The DOF is slated to submit to Congress Package 2 of the comprehensive tax reform program.
This focuses on reducing corporate income tax rates while rationalizing fiscal incentives.