Reconstituted incentives review body to have expanded functions
Finance Secretary Carlos Dominguez 3rd wants the newly reconstituted Fiscal Incentives Review Board (FIRB) to meet soon to discuss the body’s expanded functions under the Corporate Recovery and Tax Incentives for Enterprises (Create) Act once the law takes effect this month.
“I want to call a meeting right away,” Dominguez told Finance Assistant Secretary Juvy Danofrata during a recent Department of Finance (DoF) executive committee meeting.
Dominguez chairs the reconstituted FIRB under the Create Act with Trade Secretary Ramon Lopez as co-chairman.
Danofrata, who heads the Strategic, Economics and Results Group of the DoF, said the meeting of the FIRB can be held as early as April 12, 2021.
Dominguez, for his part, said the new menu of corporate tax incentives to be offered under Create will help attract investors especially those offering quality jobs and technology transfer, and introducing new industries.
Create, which was signed into law last March 26 and published in a national newspaper last March 27, takes effect on April 12, 2021. Its implementing rules and regulations are being finalized by the DoF and the National Tax Research Center.
The law is expected to provide an estimated P1 trillion worth of tax relief to enterprises over the next 10 years.
According to the Finance department, it is expected to provide tax savings to businesses amounting to P251 billion for 2021 and 2022.
Create provides an immediate 10-percentage point reduction to the previous 30-percent corporate income tax (CIT) rate of domestic micro, small and medium enterprises, and a 5-percentage point cut for all other corporations, effective July 2020.
It also redesigned the fiscal incentives system to make the grant of incentives to companies performance-based, time-bound, targeted and transparent.
The CIT cut and the rationalization of the tax incentives system are aimed at helping the country attract high-value foreign direct investments or FDIs by making the cost of doing business in the Philippines more competitive, especially at this time when the government is putting in place the country’s economic recovery program.
Under the law, the FIRB’s functions are expanded to cover not only tax incentives given to government-owned or -controlled corporations, but also those granted by investment promotion agencies and other state-run agencies to their respective registered business enterprises.
The reconstituted FIRB is also tasked, among others, to determine the target performance metrics as conditions for enterprises to avail of tax incentives; and conduct regular monitoring and evaluation of investment and non-investment tax incentives, such as cost-benefit analysis to determine their impact on the economy and whether agreed performance targets are met.
It is also responsible for reviewing the compliance of other government agencies administering tax incentives, with respect to the administration and grant of such tax perks, and impose sanctions, such as, but not limited to, the withdrawal, suspension or cancellation of their power to grant tax incentives.
The grant of tax incentives to registered projects or activities with investment capital of P1 billion and below is delegated by the FIRB to the IPAs. The FIRB is given the discretion to increase this threshold amount under the law.
Members of the FIRB include the Executive and Budget secretaries, and the director-general of the National Economic and Development Authority.