Monday, October 30, 2006

Fiscal perks: giving away the nation's birth right!

NOW that the Board of Investments (BOI) and the Bureau of Internal Revenue (BIR) have admitted that they were giving tax holidays to every Tom, Dick and Harry without asking why, it’s high time for Congress to take over and launch a thorough investigation on the matter.

Right now, Congress is trying to reform the country’s fiscal incentive system through the “fiscal rationalization” bill and it would help if they first get to the bottom of this issue. Congress should do it not just “in aid of legislation” but in pursuit of economic equity and social justice!

The other day, Trade Undersecretary Elmer Hernandez told our reporter Max de Leon that some companies are enjoying income tax holiday despite the fact that they are not eligible to get these perks. Each year, the country loses about P300 billion in forgone revenues—and part of this forgone amount goes to those who don’t deserve them because, as Hernandez admitted, many of those who availed themselves of the fiscal perks were not entitled to them.

Hernandez said the government lost billions because the BIR just allowed income tax holiday claims in their income tax returns even without proof from the BOI that the claimants were really eligible for the perks. He seems to be telling us that it’s just a simple, honest mistake, or one caused by sheer inability of state agencies to get their act together or streamline their systems owing to the great burden of their work.

We don’t think so. We believe a large part of such neglect grows out of corruption that has been plaguing the country’s fiscal-incentive system since the last several decades.

We don’t think bureaucrats from the BOI and the BIR are people who are na├»ve enough to allow these shenanigans to get through under their noses unless some people deep within these bureaucracies are benefiting financially from it.

The questions right now are the following: What are those companies that stole from the country’s coffers? Who in the BIR approved their ITH claims? How much money did the country lose to what companies since the President Aquino Executive Order 226? And why is it that BOI doesn’t seem to have any idea about how the country’s incentives system is being implemented? How about the Peza’s incentive system? These are questions that boggle our mind.

This blatant abuse of the fiscal incentives system is almost criminal. For years, the country, nay the Filipino people, have been suffering from poverty and lack of economic opportunities for the simple reason that the State could not provide good economic and social infrastructure. Bureaucrats have been telling us ordinary mortals that the government needs to collect more taxes “to finance development” and we were foolish enough to agree to a higher VAT rate on all the things we buy with our slave wages. Little did we know that while these bureaucrats were taking away food from the mouths of our children, they gave away hundreds of billions of pesos worth of income tax holidays to favored friends and clients, including to ones not entitled to the fiscal perks in the first place.

God knows how much money bureaucrats from the BIR and the BOI and other “investments promotions agencies” are really giving away to favored companies. For all we know, they have been giving away the Filipino nation’s birthright, probably the main reason why we can’t seem to achieve economic takeoff despite a favorable external economic environment.

In the last 20 years, BOI, the Philippine Economic Zone Authority and several other “investments promotion agencies” have been giving away all sorts of perks—income tax holiday; duty-free importation of machines and equipment; exemption on duties and taxes on imported spare parts; exemption from wharfage dues and export tax, duty, imposts and fees; tax exemption on breeding stocks and genetic materials; tax credits; and additional deductions from taxable income—and we can’t seem to account for their impact on the Philippine economy and our future as a nation.

Agencies like the National Economic and Development Authority, the Department of Finance, and the Department of Trade and Industry cannot account for the real contribution of these perks to economic development because they may have been designed as a vehicle for rent-seeking behavior in the bureaucracy. Amid this flurry of perks are a tangle of almost 200 other laws and executive orders giving privileges to companies to claim more fiscal perks from the country’s coffers for several other economic activities ranging from the production of steels and ships and jewelries. This confusing snarls of laws and regulations and the apparent lack of transparency with which these agencies implement them suggest that abuses like double-dipping (claiming perks for the same projects from several laws and agencies) and the brazen act of collecting perks for investment projects that were not even registered with the BOI are prevalent.

Right now, the DTI does not want to release detailed information about the issue because “they are still completing their findings.” Congress should not wait for that report before acting on behalf of the Filipino people.

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