Favored firms got P1.12-T tax breaks!

Some are apparently luckier (more deserving ?) than the others.

If celestial powers can play favorites, cannot earthly authorities do the same?

But heavenly hosts favor the righteous.

Are the benefactors of the generosity of fiscal authorities equally deserving?

Is there rhyme or reason for their award or grant?

Does such generosity generate commensurate, if not enormous, returns for the government?

Or are they freebies wantonly frittered away?

Get this: By its own admission, the government gave away an estimated P1.12 trillion in tax incentives and exemptions to a “select group” of 3,150 companies from 2015 to 2017.

Right now, favored companies, a number of them on the elite list of Top 1,000 corporations, pay discounted CIT rates of six percent to 13 percent while most other companies that employ a majority of Filipino workers pay the regular rate of 30 percent, which is the highest in the region, according to Finance Undersecretary Karl Kendrick Chua.

Such foregone revenues include income tax incentives, tax incentives on customs duties and tax incentives on import value added tax, Chua said in an official statement issued by the Department of Finance.

Among the investment promotions agencies that granted incentives to registered enterprises, the Philippine Economic Zone Authority  gave away the lion’s share of tax incentives worth about P879.1 billion, or approximately 78 percent of the three-year total.

Quite disappointingly, the DoF stopped short of naming the more than 3,000 preferred corporations lavished the fiscal privileges.

Such selective grant goes against theh grain of the avowed policy of a lvel economic playing field for business and industry.

The non-disclosure of the identities of the elite companies makes a mockery of the avowed policy of transparency.

“This is a truly massive amount. To put things in the right perspective, P1.12 trillion that we gave away in incentives over that three-year period is over twice the current (2019) budget of the Department of Public Works and Highways,” Chua lamented in the official DoF statement.

Generous to a fault is decidedly a gross understatement here.

The DPWH is headed by Sec. Mark Villar, whose family’s core  business covers land development and commercial trading, among others. The agency’s  budget this year is P549.4 billion.

Chua stressed that Package 2 of the Duterte administration’s Comprehensive Tax Reform Program aims “to ensure that any incentives granted are worth it”.

How do recipients of such perks make the grade?

In order to keep receiving incentives, companies must fulfill their commitments, such as creating good jobs or directing investment outside highly urban areas in exchange for special tax treatment over a specified number of years.

But is this noble goal being met?

No way, according to the top DoFofficial.

“Every peso given away in tax incentives is a peso that could have gone to constructing roads, classrooms or health centers, or to hiring more teachers, doctors and nurses,” Chua pointed out. “The government could have implemented so many programs and projects with P1.12 trillion that was given away to companies. ”

Opportunity cost, opportunity lost.

The DoF study showed that approximately P301.2 billion in incentives was granted in 2015, P380.7 billion in 2016, and P441.1 billion in 2017.

“We are not saying that all these incentives are not worth it, and we acknowledge that there have been benefits in the form of job creation and investments in the domestic economy,” said Chua.

“However, we cannot keep giving away tax incentives indiscriminately and indefinitely, especially if the amount keeps getting bigger and bigger every year. We need to modernize and improve the incentive system, and this is why President Duterte in his 4th State-of-the-Nation Address, called on the Congress to immediately pass Package 2.

In his SONA, the President said Package 2 would energize micro, small, and medium enterprises, giving them with more capital to expand their businesses, benefiting even more Filipinos.

To rationilze the incentives regime, Package 2 would establish a single menu of superior incentives that are performance-based, time-bound, targeted, and transparent.

It is expected to lower corporate income taxes, bringing the Philippine CIT rate closer to the Association of Southeast Asian Nations average.

He explained that, under the fair and more accountable incentive regime proposed under Package 2, companies that qualify for the superior incentives can include, among others, businesses or enterprises that invest in the countryside or outside the country’s  highly urbanized areas; that create high-quality jobs; and that invest in priority sectors identified in the Strategic Investments Priority Plan to be developed by the Board of Investments.

“The proposal under Package 2 does not eliminate incentives,” the DoF official stressed. “But if we are going to be giving away billions of pesos in tax incentives, we need to make sure that the companies who get to enjoy these incentives truly help us achieve inclusive development, as envisioned by President Duterte.”

The DoF has identified Package 2 and the rest of the packages under the CTRP as among their priority bills for the upcoming 18th Congress.

In his SONA last July 22, the President e reiterated his strong support for tax reform and asked the Congress to pass the remaining packages of the CTRP in the near future.

These include Package 2, or the corporate income tax and fiscal incentives reform, Package 2+ (excise taxes on alcohol, e-cigarettes and vapor products), Package 3 (real property valuation and assessment reform), and Package 4 (passive income and financial intermediary taxation).

Behold God’s glory and seek His mercy.

Pause and pray, people.