Marcos directs House panel to remove FIRB’s power to grant incentives — lawmaker

By Beatriz Marie D. Cruz, Reporter

PRESIDENT Ferdinand R. Marcos, Jr. wants the power to grant and approve tax incentives to be returned to investment promotion agencies (IPAs), according to the House Ways and Means Committee chairman.

Albay Rep. Jose Ma. Clemente S. Salceda said on Tuesday the Ways and Means Committee “wholeheartedly supports the President’s direction to ‘wind down’ the power of the Fiscal Incentives Review Board (FIRB) to grant and approve fiscal incentives.”

“The President wants to make the approval process more responsive. And we agree fully. So, the committee has reverted the power to grant and approve incentives to the investment promotion agencies,” he said in a statement.

Presidential Communications Office chief Cheloy Velicaria-Garafil did not immediately reply to a Viber message seeking comment.

The House Ways and Means Committee will include this provision in the CREATE MORE bill, which seeks to fix conflicting provisions of the Republic Act (RA) No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Signed into law in March 2021, the CREATE Act had expanded the powers of the FIRB, which included the authority to approve applications for tax incentives. IPAs, on the other hand, can greenlight tax incentives for registered projects or activities with investments of P1 billion and below.

Mr. Salceda, however, said the FIRB will maintain its role in policy formulation, standard-setting, and oversight, as well as grant off-menu incentives.

Finance Assistant Secretary Juvy C. Danofrata, who also heads the FIRB Secretariat, said the board’s duty is to ensure “fiscal responsibility” when granting exemptions or tax incentives.

“Before CREATE, there’s really no conscious effort on the part of anybody except I think the DoF (Department of Finance) to look into what is the cost and what is the benefit [of tax incentives and exemptions] to the economy,” Ms. Danofrata said during the committee meeting.

“As government, we want to make sure that when we grant the tax incentives, we look at the deficit for instance, we look at how these incentives is going to help the country or the economy so that all of the revenue losses will still be compensated by some other returns to the society and economy,” she added.   

Adolfo Jose Montesa, researcher at the Action for Economic Reforms (AER), said the CREATE MORE bill, if approved, would have the effect of “decapitating, essentially beheading the FIRB.”

“In particular, the bill intends to empower the president to motu propio grant incentives packages, paving the way for investment promotion agencies to circumvent the FIRB. This defeats CREATE’s purpose and principle of strengthening governance or decision making of fiscal incentives through a rigorous, fair and transparent system,” Mr. Montesa told the panel.

However, Mr. Salceda said in a statement that the panel is considering removing the proposed motu proprio power of the President “to grant tax incentives, to maintain the spirit of a performance-based and standards-based tax incentives system.”

Eleanor L. Roque, tax principal of P&A Grant Thornton, said removing the FIRB’s powers to grant and approve fiscal incentives will only benefit big projects.

“Currently, only projects with investment capital of P1 billion or more are evaluated and approved by the FIRB… So the change in the rules will impact big projects only,” Ms. Roque said in a Viber message. “Any change that will cut the processing time to make the application process streamlined and efficient is a welcome development to investors.”

According to Mr. Salceda, the House panel will approve amendments to the CREATE Act next week and will send the measure to the Senate by end-November.

“We were prepared to do it today, but the Office of the President requested for a bit more time to finalize its comments,” he added.

The CREATE MORE bill’s provisions include reducing corporate income tax to 20% for those under the enhanced deduction regime; a 200% deduction for power cost, which may be accumulated during the availment of income tax holiday; a 200% deduction for trade fair and trade mission expenses, and the application of the net operating loss carryover five years after the end of the income tax holiday period.

The bill also proposes a uniform 1.5% registered business enterprise local tax to be collected by IPAs “in lieu of all local impositions in order to reduce the point of contact with local government units.”

Mr. Salceda said the information technology and business process outsourcing (IT-BPO) sector will also be allowed to “fully undertake” work-from-home schemes.

“This will allow one of the country’s most durable sectors to remain globally competitive. The world has moved towards hybrid, and it does not make sense to limit ourselves in this area,” he said.

Finance Secretary Benjamin E. Diokno earlier said that amendments to the CREATE law will improve the country’s investment climate.

“The proposed amendments to the CREATE Act will enhance the incentive system, clarify the rules and policies on the grant and administration of incentives to qualified enterprises, and address issues affecting the country’s investment climate,” Mr. Diokno said in an Oct. 25 statement.