DOJ: President can grant tax breaks, power discounts

The President of the Republic of the Philippines may grant tax benefits, power rate discounts, and other incentives to qualified investors in the interest of national economic development, the Department of Justice said over the weekend.

Justice Secretary Jesus Crispin Remulla, in a seven-page legal opinion dated 8 July 2025, emphasized that such support extended to preferred private entities does not violate the equal protection clause guaranteed under the Constitution.

He said jurisprudence teaches that while the equal protection clause is against undue favor and individual or class privilege, it does not demand absolute equality. It merely requires that in conferring privileges and enforcing liabilities, all persons under like circumstances and conditions be treated alike.

Remulla added, “It does not prohibit legislation that grant only privileges or incentives to persons falling within a specified class, if the law applies alike to all persons within such class, and reasonable grounds exist for making a distinction between those who fall within such class and those who do not."

The legal opinion was issued by the DOJ upon the request of Department of Finance (DoF) Secretary and Fiscal Incentives Review Board (FIRB) Chairperson Ralph Recto, concerning the President’s authority under Section 301 of the National Internal Revenue Code of 1997 (Tax Code) to grant budgetary support to private entities behind highly desirable projects.

Section 301 provides that the President may “modify the mix, period or manner of availment of incentives provided under this Code or craft the appropriate fiscal and non-fiscal support package for a highly-desirable project or a specific industrial activity based on defined development strategies,” either “in the interest of national economic development, or upon the recommendation of the FIRB.”

Recto, in his letter-requests dated 24 February and 7 May 2025, disclosed that a private entity has applied for registration with the Philippine Economic Zone Authority (PEZA) and tax incentives for a project worth over P50 billion.

The project also seeks non-fiscal support such as discounts on power expenses and transmission charges, water diversification, and construction of a substation.

Recto noted that due to the “novel and unprecedented” nature of the project, the FIRB has endorsed it for the grant of fiscal and non-fiscal incentives by the President, pending the DOJ’s legal opinion.

He also said the Department of Finance holds the position that the President may grant incentives to valuable projects without needing FIRB’s recommendation.

Remulla upheld Recto’s position, saying that while prior recommendation from FIRB is not required, the President’s decision under Section 301 must still be guided by FIRB’s determination of what qualifies as a highly desirable project, the maximum level of incentives, and the performance targets for the grantee.

The DOJ also concurred with Recto that the President may grant power discounts as non-fiscal incentives for such projects.

It additionally advised the FIRB to be guided by Republic Act 10667 or the Philippine Competition Act to ensure that incentives do not unfairly distort competition and trade.

Remulla stated in the opinion, “The grant of incentives by the government to qualified investment constitutes a pact between the government and the company. On the part of the government, it is generally intended to enhance economic efficiency."

He added that agreements which contribute to economic progress may not necessarily be considered anti-competitive.