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Govt to abolish business tax credits in favor of cash refund


Starting next year, government will be issuing cash refunds instead of tax credit certificates (TCC) to businesses, the Department of Budget and Management said Wednesday. The Bureau of Internal Revenue (BIR) has allotted more than P8.3 billion of its 2012 budget for the transition. Budget Secretary Florencio Abad said the policy stemmed from the fact that TCCs are difficult to monitor and the transactions are susceptible to irregularities. Both the Japan International Cooperation Agency (JICA) and the Commission on Audit have aired the same view in the past, the Budget chief said. Businesses that overpay their taxes are given TCCs instead of a refund, and may be applied to offset their tax liabilities. According to the Finance Department, TCCs are also given as incentives to businesses that import raw materials for export products. "Cash refunds, on the other hand, are less burdensome in terms of accounting and bookkeeping," Abad said. "It promotes transparency that will have a positive impact on the country’s investment climate." In an earlier interview, Finance Assistant Secretary Ma. Teresa Habitan said TCCs often ties up the money for the purpose of alleviating tax liabilities. "That means, they can't use that (TCC) for another purpose — such as capital expenditures — but merely for settling of obligations," Habitan said. Finance Department data showed some 289 TCCs were in January to April this year, amounting to P1.096 billion, down by 30.8 percent from the P1.584 billion worth of TCCs issued in the same 2010 period. —JMT, GMA News

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