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August 6, 2007

Govt to evaluate corporate tax incentives
The Philippines government will conduct an evaluation of the fiscal incentives granted to all corporate taxpayers in order to enhance tax collections, Manila Times quoted the Department of Finance (DOF) as saying.

State-run National Tax Research Center (NTRC) recommended the establishment of a coordinating network to include the Bureaus of Internal Revenue (BIR) and of Customs (BOC) as well as incentive-granting agencies such as the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA).

The BIR has limited resource capability to conduct audit of all corporate taxpayers, so the agency has to prioritize the sectors that would fall under the audit, Lourdes Recente, a DOF director, said in a memorandum dated August 2, 2007.

Because of this, there is a need to evaluate the present policy of the BIR in so far as the conduct of audit on corporate taxpayers is concerned and to ascertain its efficacy to determine where further improvements are necessary, Recente said.

“We are in support of the suggestion to review international tax agreements/tax treaties to determine whether there is need for amendments to avoid tax avoidance or tax reductions schemes being perpetrated by the multinational corporations,” she said.

The DOF recommended exercise of prudence and better judgment should be applied during the negotiation stage of these tax agreements/treaties to avoid possible leakages and loopholes later on.

NTRC suggested that BIR and BOC set up a database on fiscal incentives for the regular tracking of claims.

BIR also suggested coming up with a selection criteria as to which corporations will be subjected to audit and investigation. BOI to require CSR from investors seeking perks

For its part, the BOI will require investors applying for fiscal and other incentives to engage in corporate social responsibility (CSR) activities.

Trade Undersecretary Elmer C. Hernandez, BOI managing head, told reporters that investors planning to avail themselves of pioneer income-tax holidays under the 2007 Investments Priorities Plan (IPP) are “enjoined” to perform CSR to enable them to utilize the benefits of the full pioneer status or an entitlement of a six-year income-tax holiday.

Hernandez explained that after four years of income-tax holidays, companies can enjoy the remaining two years of the perk if they can show proof that the benefits given to them have trickled down to host communities of their investments.

“The CSRs should be approved and endorsed by the National Antipoverty Commission, a certain percentage of the fiscal incentive is one of the areas we are looking at,” he said.

The same companies have to submit reports of the CSR activities that they have accomplished, before the BOI decides on whether they deserve to enjoy the two remaining years of fiscal perks.

Non-pioneer status firms, however, would only be “encouraged” to undertake CSR, Hernandez said. The BOI will push for a bill in Congress shifting its focus from an incentive-giving body to an investment-promoting agency. “The objective is to make BOI focus on promoting investments, and give the regulatory duties to a new unit,” Hernandez said. Manila Times

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