A CAMPAIGN to raise the investment threshold beyond P1 billion before a project can go before the Fiscal Incentives Review Board (FIRB) would weaken tax reform by removing many investments from scrutiny, according to Action for Economic Reforms (AER), a policy think tank.
In a statement Tuesday, AER said the request of the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) to increase the threshold for projects going before the FIRB in the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill is a “self-serving, shallow argument that will render the FIRB toothless.”
“Even if the bicameral conference committee convenes to reconcile the House and Senate versions of the bill, legally, it cannot insert the amendment that some industry leaders are asking for as the amendment cannot be found in either the House bill or the Senate bill,” it added.
The Senate approved Senate Bill No. 1357, its version of CREATE, on third and final reading last week. It proposes to cut the corporate income tax to 25% from 30% currently, with further reductions of one percentage point each year starting 2023 until it falls to 20% by 2027.
The measure also seeks to strengthen the capacity of the FIRB, chaired by the Secretary of Finance, to oversee the grant of incentives by investment promotion agencies (IPAs) and other bodies. The bill as it currently stands delegates investment approval for projects under P1 billion to the IPAs; projects beyond that threshold are to go before the FIRB.
SEIPI President Danilo C. Lachica has called the threshold too low and warned of approval delays and investor withdrawals if the FIRB approves projects at the P1 billion level.
“If you think about it, that P1 billion is like $20 million and that’s way below the expansion, and even the reinvestment cost for multinationals. For one, it clips the authority of the PEZA (Philippine Economic Zone Authority). It will (also) be a disincentive for investors because of the potential red tape,” Mr. Lachica told the Arangkada online forum Tuesday.
SEIPI is targeting an increase in the threshold to at least $1 billion (P48 billion), he said.
“While (existing rules state) that if not approved for 45 days it is considered approved, (the period is) very very long. It’s too low, and it may create bottlenecks and bureaucracy in the process,” he added.
The AER, leaving the authority to approve investments to various independent IPAs could lead to “incoherence, inconsistency, and weakening accountability” and the uncertainty surrounding the decision-making may discourage investors.
“It is but proper that more diligence be put in place for bigger amounts of investments,” said AER Coordinator Filomeno S. Sta. Ana III in the statement. — Beatrice M. Laforga