Fiscal Incentives Rationalization, Harmonization, Management, and Transparency

Currently, the government does not have a system to collect, measure, analyze, and use information on the tax subsidies or incentives it grants to private entities. In 2011, revenues foregone from tax incentives were projected to have reached P144 billion alone from just under 30% of available data captured. With the limited resources the government has, the DOF believes that a more efficient system stems from having better information to facilitate analysis and evaluation of the cost, economic impact, and benefit incidence of tax incentives.

Thus, the DOF advocates for legislation to develop and establish a system to measure the fiscal exposure of the government from tax incentives, for transparency and proper disclosure, informed economic planning, fiscal prudence, and public accountability in policy decisions and government actions. Maintaining such a system is in accordance with international best practices and will only improve our competitiveness.

Further, the DOF believes that tax incentives should address the viability gap. Profitable business ventures should no longer be subsidized by the government. The DOF also recommends sunset provisions in granting tax incentives as the government cannot perpetually subsidize investment activities. Finally, the DOF supports the replacement of redundant instruments like the Income Tax Holiday (ITH), in favor of performance-based types of tax incentives, such as accelerated depreciation and longer carry over of losses.

The DOF also supports legislation to rationalize the mining fiscal regime, as part of its commitment to balance the competing demands of growing the economy while ensuring the responsible use of natural resources by extractive industries. As natural resources are essentially in public ownership, the DOF believes that the public sector should be able to gain a fair and equitable share of the revenues to augment funding for public investments in infrastructure, environmental protection, as well as social and human services.