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P481 Billion In Foregone Revenues Bared
- By The Financial District
- Jul 20, 2021
- 2 min read
Fiscal incentives enjoyed by favored enterprises have cost the government PHP481.7 billion in foregone revenues in 2019 alone, or a year before the landmark congressional approval of the law that finally introduced bold reforms in the corporate income tax (CIT) system.
This substantial amount already represents a decrease from the PHP518.7 billion in tax perks given away by the government in 2018 through the various investment promotion agencies (IPAs) and through fiscal incentives granted to cooperatives, according to a report to Finance Secretary Carlos Dominguez III.
The Department of Finance (DOF) expects future fiscal and non-fiscal incentives to be rationalized to ensure that these are performance-based, targeted, time-bound, and transparent, following the enactment of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law last March.
According to the report of the DOF-Domestic Finance Group (DFG), of the PHP481.7 billion worth of incentives granted to a select group of corporations in 2019, PHP149.28 billion or almost a third of the total were in the form of income tax incentives.
These include the income tax holiday (ITH) accounting for PHP68.4 billion (14.2 percent); the special income tax rate for IPA-registered enterprises accounting for PHP66.41 billion (13.8 percent); and the income tax incentives for cooperatives accounting for PHP14.47 billion (3 percent), said Assistant Secretary Ma. Teresa Habitan of the DFG at a recent DOF executive committee (Execom) meeting.
The incentives for the value-added tax (VAT) accounted for PHP283.45 billion (58.8 percent) of the incentives; exemptions from customs duties, PHP47.59 billion (9.88 percent) and the percentage tax incentive availed by cooperatives, PHP1.38 billion (0.29 percent), she added.
The DOF study covered 11,431 enterprises that filed their tax returns, of which 5,749 were IPA-registered firms and 5,682 were cooperatives. Of those that availed of income tax incentives, 3,083 were IPA-registered companies and 4,371 were cooperatives, she added.
These amount to a total of 7,454 or 57.5 percent of the 11,431 enterprises that were granted income tax perks, Habitan said.
