Photo by. interaksyon.com “He said these foregone revenues were a result of tax incentives given out to select enterprises.

The unbalanced fiscal incentives given to only 3,102 firms registered with various investment promotion agencies (IPA) cost the government P178.56 billion in foregone revenues last year, the Department of Finance (DoF) said yesterday.

Finance Undersecretary Karl Kendrick Chua cited data from the Bureaus of Internal Revenue and of Customs showing the government had foregone P74.53 billion in revenues from income tax holidays (ITH), P46.66 billion from special income tax rates and P57.38 billion from Customs duties.

Appearing before the House committee on Ways and Means budget hearing, Chua said data collated by the DoF’s Domestic Finance Group (DFG) do not yet include foregone revenues from the value-added tax (VAT) exemptions on imports and local VAT that enterprises registered with IPA also get to enjoy. They also do not yet include the foregone local taxes and leakages that may arise as a result of abuse of transfer pricing.

He said these foregone revenues were a result of tax incentives given out to select enterprises collectively termed as “investment tax expenditures.”

Under the Budget of Expenditures and Sources of Financing document published by the Department of Budget and Management, these only include ITH, special income tax rates and incentives on customs duties.

Foregone revenues from investment incentives, excluding VAT and local tax privileges, grew 71.03 percent in 2016 from the previous year’s figure of P104.40 billion and were 52.52 percent higher from 2015 projections, the DoF-DFG report said.

The report said these revenue losses are expected to increase to P196.02 billion or by 9.77 percent in 2017.

For 2015, the DoF was already able to include estimates of revenue losses from VAT exemptions which reached about P196.83 billion for that year on a gross basis.

Adding this figure to the investment tax expenditures of P104.40 billion from ITH, special tax rates and custom duty incentives, this brings the total estimated foregone revenues of the government from investment incentives to P301 billion in 2015 alone, Chua said.

He told lawmakers that 2015 was the earliest year when the Tax Incentives Management and Transparency Act made possible the monitoring and review of the economic impact of incentives given to businesses.

Chua said the Philippines has 14 IPA that are authorized to grant incentives to a select group of businesses. Moreover, some 315 special laws exist that grant other forms of incentives beyond what the IPA give.