DOF rejects calls to review tax perks regime

The Department of Finance has rejected calls by industry groups to review the revised fiscal incentives tax regime and reportorial requirements for the grant of incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law.

Finance Secretary Benjamin E. Diokno, who also chairs the Fiscal Incentives Review Board (FIRB), said on Thursday, Nov. 10, that government should exercise fiscal prudence in granting tax incentives in line with the provisions under the CREATE law as he pointed out that tax incentives are costs to the government, thus the need to balance out the requirements of both the state and investors.

“What we aim through the CREATE Act is to attach accountability and responsibility for every tax exemption given, since the incentives we give

out entail important costs to the government,” Diokno explained.

“The government is obligated to exercise prudence in determining which financial resources to forgo in favor of higher economic returns that will benefit the taxpaying community,” Diokno said.

He added that it is the FIRB’s modernized fiscal incentives system that enables the CREATE Act to effectively generate more investments and quality jobs that ultimately boost economic growth.

Finance Assistant Secretary and FIRB Secretariat Head Juvy Danofrata supported this view, stating that, “a transparent approval system of tax incentives can be expected through the implementation of the CREATE Act.”

“This is also the mandate we are championing in the FIRB: to carefully ensure that the enterprises’ projects granted with tax perks present substantial economic gains for the country,” Danofrata said.

The 2022 Strategic Investment Priority Plan (SIPP), developed by the Board of Investments (BOI) in coordination with the FIRB and other stakeholders, serves as the primary basis for determining priority industries, projects, and activities that can be granted fiscal incentives under the CREATE Act.

Categorized into three tiers, priority projects and activities listed under Tier III are directed towards emerging technologies that are consistent with the fourth industrial revolution, such as: artificial intelligence, nanotechnology, biotechnology, advanced digital production technologies, and innovation support facilities including space-related infrastructures.

Moreover, these activities represent those that are qualified for longer income tax holidays.