COST-BENEFIT ANALYSIS ON INVESTMENT INCENTIVES INCORPORATED INTO TIMTA -ANGARA

Senator Sonny Angara, chairman of the ways and means committee, has proposed committee amendments on the Tax Incentives Management and Transparency Act (TIMTA) which include a new provision mandating the conduct of cost-benefit analysis on investment schemes.

Under the amendment, the National Economic Development Authority (NEDA) is mandated to conduct an annual cost-benefit analysis on the investment incentives to determine the impact of tax incentives on the economy.

"We are staying true to the essence of the bill which is to provide a solution for the lack of information and data on fiscal incentives and what it reciprocates to the economy. With NEDA's cost-benefit analysis, it will allow policymakers to make better decisions, going forward, in crafting or revising laws, in overseeing the implementation of existing investment-related laws, and in managing the nation's finances," said Angara, sponsor of the TIMTA bill.

All heads of the investment promotion agencies (IPAs) must submit to the NEDA investment-related data which will include, but not limited to, the list of registered business entities, investment projects, investment cost, actual employment and export earnings, while for tax incentives data, the Department of Finance (DOF) will furnish NEDA a copy of the reports submitted by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).

As for the monitoring of tax incentives information, Angara proposed an amendment mandating the DOF to submit to the Department of Budget and Management (DBM) the following data: (a) actual amount of tax incentives availed by registered business entities, (b) estimate claims of tax incentives immediately preceding the current year, (c) programmed tax incentives for the current year, and the (d) projected tax incentives for the following year.

For transparency purposes, these data and information will be reflected by the DBM in the annual Budget of Expenditures and Sources of Financing (BESF), which shall be known as the Tax Incentives Information (TII) section.

Angara noted that the TII will be limited to the aggregate data related to incentives availed of by registered business entities based on the submissions of the DOF and the concerned IPAs, categorized by sector, by IPA and type of incentive.

The DBM will submit the BESF to the President and to the Chairpersons of the Committees on Finance and Appropriations of the Senate and the House of Representatives, respectively, copy furnished the Chairpersons of the Committees on Ways and Means and Committees on Economic Affairs of both houses of Congress, the Chairperson of the Committee on Trade and Commerce of the Senate, and the Chairperson of the Committee on Trade, Commerce and Entrepreneurship of the Lower House.

"It must be stressed that the proposed TIMTA does not, in any way, diminish or limit the amount of incentives that IPAs may grant pursuant to their charters and existing laws, or prevent, deter or delay the promotion and regulation of investments, processing of applications of registrations and evaluation of entitlement of incentives by IPAs," the senator said.

Penalties for non-compliance with reportorial and filing requirements were also amended wherein repeated violations will be penalized with the cancellation of the registration of the business entity.

Meanwhile, any government official or employee who fails without justifiable reason to provide or furnish data or information as required under this law, will be punished by a fine equivalent to that official's or employee's basic salary for a period of one month to six months or by suspension from government service for not more than one year, or both, in addition to any criminal and administrative penalties imposable under existing laws.

All proposed committee amendments, which are mostly based on the DTI-DOF agreed version on TIMTA, were approved in the plenary, and the senators will then propose their individual amendments before voting for its approval on second and third reading.

"Fiscal incentives cannot be evaluated in a vacuum given the many benefits such as jobs and rural development that come along with these incentives. We need to better monitor the fiscal incentives we give to ensure that the revenue we forego actually leads to more investments and high-income jobs," Angara said.