The government lost P178.56 billion in potential revenues in 2016 as a result of tax incentives given to 3,102 companies registered with various investment promotion agencies, the Finance Department said Tuesday.
Finance Undersecretary Karl Kendrick Chua said that based on data from the Bureau of Internal Revenue and the Bureau of Customs, the government had foregone P74.53 billion in revenues from income tax holidays, P46.66 billion from special income tax rates and P57.38 billion in customs duties.
These foregone revenues as a result of tax incentives given out to select enterprises were 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 included ITHs, special income tax rates and incentives on customs duties.
Chua said at a hearing of the House committee on ways and means that the data collated by the DOF’s Domestic Finance Group did not yet include foregone revenues from the value-added tax exemptions on imports and local VAT that enterprises registered with IPAs were also able to enjoy.
It also did not include the foregone local taxes and leakages that may arise as a result of abuse of transfer pricing.
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 than the 2015 projections, the DOF-DFG report said.
The report said these revenue losses were expected to increase to P196.02 billion or by 9.77 percent in 2017.
The Finance Department said that for 2015, it was 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 ITHs, special tax rates, and custom duty incentives, the total estimated foregone revenues of the government from investment incentives reached P301 billion in 2015 alone, Chua said.
Chua said the Philippines had 14 IPAs that were 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 IPAs give.