A year before the landmark congressional approval of the law that finally introduced bold reforms in the corporate income tax (CIT) system, fiscal incentives enjoyed by favored enterprises have cost the government P481.7 billion in foregone revenues.
The 2019 figure represents a decrease from the P518.7 billion in tax perks given away by the government in 2018 through the various investment promotion agencies (IPAs) and through fiscal incentives granted to cooperatives, a report to Finance Secretary Carlos Dominguez III said.
The Department of Finance (DOF) expects future fiscal and non-fiscal incentives to be rationalized to ensure that these are performance-based, targeted, time-bound, and transparent, following the enactment of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law last March.
The report of the DOF-Domestic Finance Group (DFG) said of the P481.7 billion worth of incentives granted to a select group of corporations in 2019, P149.28 billion or almost a third of the total were in the form of income tax incentives.
These include the income tax holiday (ITH) accounting for P68.4 billion (14.2 percent); the special income tax rate for IPA-registered enterprises accounting for P66.41 billion (13.8 percent); and the income tax incentives for cooperatives accounting for P14.47 billion (3 percent), said Assistant Secretary Ma. Teresa Habitan of the DFG at a recent DOF executive committee (Execom) meeting.