House panel approves proposed Investments and Incentives Code

Monday, 06 June 2011 09:16

The House Committee on Ways and Means has approved the proposed Investments and Incentives Code of the Philippines, one of the 23 priority bills of the Aquino administration that aims to enhance the national economy's global competitiveness through investment promotion and industrial development activities.

The substitute bill is a consolidation of House Bill 4152 filed by House Speaker Feliciano Belmonte, Jr. and Majority Leader Neptali Gonzales II, HB 3162 by Rep. Gloria Macapagal-Arroyo (2nd District, Pampanga), HB 938 by Susan Yap (2nd District, Tarlac) and HB 4402 by Rep. Albert Garcia (2nd District, Bataan). Speaker Belmonte said investments spur growth as more investments translate to more employment opportunities. "The State should ensure that investments incentives shall promote substantial social and economic spill-over and equitable development across income classes and across provinces."

The Speaker further said a balance has been sought to be formulated between the need to attract investments by offering fiscal incentives on one hand and the equally important need to exercise prudence in granting such incentives on the other.

Gonzales said investments spur growth as more investments translate to more employment opportunities. It is therefore the policy of the State, he said, to ensure that investments incentives shall promote substantial social and equitable spill-over and equitable development across income classes and across provinces.

Macapagal-Arroyo, an economist, said the proposal if enacted into law would generate more revenues and savings for the government by eliminating redundancy in all existing laws.

"The government offers fiscal bonuses to investors under various incentive laws, which become redundant in some cases. The fiscal cost to government of these incentives in the form of foregone revenue amounts to P47 billion. This could substantially fund basic social services in the form of more school buildings, hospitals, or infrastructure facilities like roads, bridges, and ports, among others," she said.

Since these incentives are provided under different laws with differing provisions, Macapagal-Arroyo sees an urgent need to harmonize these by offering attractive fiscal discounts on one hand and exercising prudence in granting it.

Yap, a vice chairperson of the Committee on Women and Gender Equality, said it is in the best of the country to enhance its competitiveness in the global economy through investment promotion and industrial development activities geared towards employment generation and countrywide development.

While incentives offer perks for investors, thus making it desirable to invest in the country, a balance must be achieved between revenue generation and the investment climate according to Yap.

Garcia, Chairperson of the Committee on Trade and Industry, said an Investments and Incentives Code will enhance the country's competitiveness as an investment site and ensure that incentives are cost efficient.

"While a number of investment-enhancing measures are in place, a more effective policy framework that would provide a stable and predictable investment regime for the country underpins the urgent enactment of the proposed Investments and Incentives Code of the Philippines," Garcia said.

He said the increasing global competition requires an enhanced policy framework for investment, including a strengthened institutional system, and implementation of more effective investment promotion strategies to vigorously market their countries. He said the rationalization of incentives is necessary in order to streamline regulation, which is considered as a requisite in attracting investments, among other things.

The bill provides that the investment policies of the State shall specifically be to: pursue a market-responsive investment regime; formulate industry and sectoral development programs; undertake investment promotion activities; grant incentives that are simple to administer, time-bound and performance-based; and recognizes that industrial peace is essential to attracting investments.

It assigns the Board of Investments to formulate an evolving National Framework for Investment Promotions (NFIP) and promulgate its rules, regulations and policies that shall govern all Investment Promotion Agencies (IPAs).

The BOI shall also formulate an evolving National Framework for Industrial Development (NFID) and promulgate its rules, regulations and policies in consultation with the private sector. The NFID shall identify key emerging markets or industries that will substantially enhance the competitiveness of the country, which shall include among others, research and development, agricultural technology, biomedical devices and systems, renewable energy, logistics and information communications and technologies.

The BOI shall also promulgate rules, regulations and policies on the administration of incentives which IPAs are mandated to implement. It shall establish and act as coordinator of the Investment Promotion Action Center (i-PAC) that shall serve as the link to all government agencies to facilitate entry, retention, expansion and diversification of investments.

It shall create and operate regional investment centers in the country, and overseas investment offices.

The Agency shall also recommend to the President the suspension of the nationality requirement provided for in the proposal in appropriate cases such as those involving bilateral, multilateral, or regional investments, or when the existing laws of another country where the investor comes from provides no nationality restrictions for Filipino investors or provides for reciprocal nationality accommodations.

On the establishment of Domestic Industrial Zones, the bill provides that DIZs must conform to these criteria, among others: proposed area must be identified as a regional growth center in the Medium Term Development Plan or by the Regional Development Council; availability of water source and electric power supply; area must be strategically located; area must have a significant incremental advantage over the existing economic zones and its potential profitability can be established; and area must be situated where controls can easily be established to curtail smuggling.

Among the proposed incentives to registered enterprises are: income tax-based incentive options for those located inside or outside ecozones or free ports; value added tax (VAT) refund and exemption from customs duty treatment on importation of capital equipment and raw materials; tax and duty free importation of source documents; zero percent VAT rate on the sale by a domestic enterprise to a registered export enterprise; exemption from wharfage dues; and employment of foreign nationals

The bill also provides incentives for registered domestic enterprises in Mindanao and the 30 poorest provinces or less developed areas (LDAs), namely: income tax-based incentive options; exemption from VAT and customs duty on importation of capital equipment; VAT refund on importation of capital equipment; and special realty rate taxes on equipment and machinery.