FISCAL incentives enjoyed by favored enterprises have cost the government P481.7 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 system.
This substantial amount already represents a decrease from the P518.7 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 the Department of Finance (DOF).
The 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 P481.7 billion worth of incentives granted to a select group of corporations in 2019, P149.28 billion or almost a third of the total were in the form of income tax incentives.
These include the income tax holiday accounting for P68.4 billion (14.2 percent); the special income tax rate for IPA-registered enterprises accounting for P66.41 billion (13.8 percent); and the income tax incentives for cooperatives accounting for P14.47 billion (three percent), Assistant Secretary Ma. Teresa Habitan of the DFG said at a recent DOF executive committee meeting.
The incentives for the value-added tax (VAT) accounted for P283.45 billion (58.8 percent) of the incentives; exemptions from customs duties, P47.59 billion (9.88 percent) and the percentage tax incentive availed by cooperatives, P1.38 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 themselves of the income tax incentives, 3,083 were IPA-registered companies and 4,371 were cooperatives, she said.
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.
The various IPAs include the Board of Investments, Regional Board of Investments – Autonomous Region in Muslim Mindanao, Philippine Economic Zone Authority, Bases Conversion and Development Authority, Subic Bay Metropolitan Authority, Clark Development Corp., Poro Point Management Corp., Cagayan Economic Zone Authority, Zamboanga City Special Economic Zone Authority, Aurora Pacific Economic Zone and Freeport Authority, Authority of the Freeport Area of Bataan, and Tourism Infrastructure and Enterprise Zone Authority.
For 2019, the manufacturing sector took the biggest share at 66.7 percent of the total tax incentives, amounting to P321.3 billion.
The services and energy sectors were granted P114.8 billion (23.83 percent) and P26.36 billion (5.47 percent) of incentives, respectively.
Tax perks for the other sectors, such as agriculture and fisheries, amounted to P19.24 billion or 3.99 percent of the total tax expenditures for 2019, Habitan said.
In the case of cooperatives, it received a total of P32.2 billion worth of tax incentives in 2019, she said, adding that the majority of cooperatives that enjoyed tax perks were service cooperatives in the banking and financing industries.
These foregone revenues from tax incentives were based on the perks granted to registered enterprises before the enactment of the Create law. (PR)