DOF, DTI, DBM, and NEDA Register Concerns Over TIMTA Amendments

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DOF, DTI, DBM, and NEDA Register Concerns Over TIMTA Amendments

Four Cabinet Secretaries, the heads of the Department of Finance (DOF), Department of Trade and Industry (DTI), Department of Budget and Management (DBM), and the National Economic and Development Authority (NEDA), sent a joint position to the House of Representatives and the Senate of the Philippines on the recent congressional amendments to the proposed Tax Incentives Management and Transparency Act (TIMTA).

Signed on 16 June 2015, the joint position expresses objections to major amendments to the bill that were introduced by the House and the Senate, and that contained major policy and administrative deviations from the original intent agreement by the DOF and the DTI:

1.       The deletion of the House and Senate of the reporting requirement for NEDA to conduct a cost-benefit analysis on the economic impact of tax incentives; and

2.       The insertion of the “deemed approved” provision, where tax incentives to registered enterprises are considered granted if the BIR fails to inform the Board of Investments (BOI) or the concerned  Investment Promotion Agency (IPA) and the registered business entity of its findings within six months from the receipt of the endorsement or IPA’s recommendation.  

DOF, DTI, DBM, and NEDA jointly propose the reinstatement of the reporting requirement for NEDA to conduct the analysis on investment incentives based on the data submitted by the IPAs and the DOF. 

The publishing of the impact of tax incentives by NEDA to relevant government offices and authorities allows for a higher level of understanding of how tax incentives work for the benefit of the economy. The reporting requirement ensures fiscal transparency in line with the goal to institute a transparent and accountable public financial management system.

DOF, DTI, DBM, and NEDA jointly propose the deletion of the “deemed approved” provision because it shortens the time that the BIR is given to audit books, from the original three year period to only 180 days. This is contrary to what is provided in the Tax Code for the amount of time that the BIR is allowed to examine a taxpayer’s books.  

The BIR also notably opined that three years is not enough time to audit a taxpayer’s books. Further, the original DOF-DTI endorsement stated that the 18-month period covering the acceptance and review of the application by the BOI and other relevant Investment Promotion Agencies  shall toll the prescriptive period of the BIR to make any assessment.

The four cabinet secretaries thank the leadership of both houses for shepherding the TIMTA bill in Congress and urge the leadership to strongly consider the comments in the spirit of instituting policy reforms in transparency and good governance.

The TIMTA aims to promote transparency and accountability in granting tax incentives to business entities, and private individuals and corporations. Under the bill, data and information on tax incentives claims of registered entities and individuals, and the amount of tax and duty incentives granted them shall be evaluated and monitored under a comprehensive database.