Purisima: Govt needs to rationalize incentives

The government needs to rationalize “redundant" incentives for investors now that the Aquino administration has launched its flagship project, the public-private partnership (PPP) initiative, the Department of Finance (DOF) said over the weekend. “[Fiscal] incentives are still necessary since the Philippines has issues on infrastructure. [But] it needs to be competitive in getting investors to come in," Finance Secretary Cesar Purisima told reporters at a DOF-hosted dinner. The DOF and Department of Trade and Industry have agreed to streamline the fiscal incentives several government agencies give to investors. “We have agreed to come up with a common position," said Purisima. He said laws granting incentives to investors should have a “sunset provision" or clause that repeals all or portions of certain laws after a specific date. “The focus should be [to draw] investments that won’t come here if not for incentives. We must minimize the grant of incentives to domestic companies that would make the investments here anyway," Purisima pointed out. The government should offer flexible incentives instead of a uniform set of fiscal perks across the board, he said. “We must offer incentives not as a set. It must be flexible. We must be smarter in granting incentives." Meanwhile, Purisima said the laws granting fiscal perks to state-run National Grid Corp. of the Philippines and operators of free ports and economic zones in Aurora and Bataan provinces should be repealed. He was referring to the Aurora Special Economic Zone Act of 2007, Freeport Area of Bataan Act of 2009, and Expanded Value-Added Tax Law. The DOF argued that free ports are a huge challenge to the Bureau of Customs (BOC), saying that the “free flow" of all goods into the country and non-imposition of taxes and duties are vulnerable to smuggling activities. Smuggling deprives P6 billion on the country’s revenue stream and poses unfair competition to domestic industries, the DOF added. There is a need to impose value-added tax instead of franchise tax for power transmission, the department said. The DOF said the national purse loses about P7 billion a year, as Republic Act 9511 which created the National Grid Corp. of the Philippines to replace state-run National Transmission Corp., subjected the company to a 3-percent franchise tax instead of all taxes including the 12-percent sales tax. — JE/VS, GMANews.TV