THIRTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
1 
5. No. __ 
1839 
___ 
Introduced by Senators 
FRANKLIN M. DRILON, JUAN M. FLAVIER and FRANCIS N. 
PANGILINAN 
EXPLANATORY NOTE 
Fiscal Incentives are widely used to promote social, political and 
economic objectives. Some of these objectives are promotion of domestic 
and foreign investments, reducing regional disparities, and creation of 
jobs. But there have been questions surrounding the efficacy of fiscal 
incentives offered by the Government, and the cost effectiveness of 
providing them for investment promotion, social and economic 
development. They have been attacked on various grounds, including 
among others : the ensuing revenue loss, its relative ineffectiveness in 
achieving intended goals, distortions in resource allocation, and the 
vulnerability of tax incentive systems to syndicated crimes, graft and 
corruption. 
The current fiscal incentives structure in the country is 
complicated, fragmented, inefficient and costly in administrative and 
revenue terms. The fiscal incentives system has long been suffering from 
policy overload. The general practice of picking winners and losers in the 
grant of fiscal incentives has been muddled and in its stead, incentives 
were given to those sectors that can effectively lobby. 
To date, there are 124 provisions of laws granting tax and duty 
exemption privileges to private and government sectors. 
This has 
resulted in a tax incentives regime competing against one another, 
opportunities for incentive-shopping by firms or double availment of tax 
incentives. Tax incentives have also been granted to activities that do 
not promote the country's development objectives. 
On top of the problems posed by the grant of fiscal incentives on 
monitoring and management is the problem of foregone revenues of the 
National Government. Last year, the cost to the government of the grant 
of fiscal incentives amounted to P 229.4 Billion or 5.33% of GDP. The 
grant of fiscal incentives even outgrew the country's production. The 
grant of fiscal incentives grew by 61% from 2002 to 2003 while GDP grew 
by a meager 9%. 
The revenue foregone from various investments incentives laws last 
year could have been enough to cover the budget deficit of P199.9 Billion. 
The government is presently faced with serious budgetary constraints to 
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adequately finance all the priority programs and projects of social 
importance such as housing, health, food, and education among others. 
It cannot afford to continue losing legitimate revenues from various 
inefficient investment incentives packages. 
The continuous grant of fiscal incentives results in inequity 
because some sectors become “free riders”. 
I t  also places the heavy 
burden of financing basic service to salaried individuals that are caught 
in the tax net. 
This bill, therefore, proposes a refo-m in fiscal incentives, zeroing 
in on the special laws or provisions of laws granting fiscal incentives. 
This bill proposes the express repeal of the fiscal incentives provisions in 
various laws. This proposed legislation on the fiscal incentives will save 
the government sufficient revenues to help ease the fiscal burden. More 
than P 5 Billion in revenue savings can be expected from this proposal. 
What cannot be quantified, but surely are benefits from this proposal, 
would be the administrative simplicity and reduction in implementation 
costs that this proposal will likewise bring. The proposed repeal is also 
intended to pave the way for an incentive system that is highly focused 
on promotable areas of investment and which would be easy to manage, 
administer and monitor. 
Passage of this bill is earnestly requested. 
F 
IER 
2 


THIRTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
1 
S E N A T E  
'04 
OCT 27 PI :31 
1833 
S. No. 
~ 
Introduced by Senators 
FRANKLIN M. DRILON, JUAN M. FLAVIER 
and FRANCIS N. PANGILINAN 
AN ACT RATIONALIZING THE FISCAL INCENTIVES SYSTEM BY 
WITHDRAWING THE TAX AND DUTY EXEMPTIONS AND 
PREFERENTIALTREATMENTGRANTEDTOGOVERNMENTAND 
PRIVATE ENTITIES UNDER SPECIAL LAWS, WITH CERTAIN 
EXCEPTIONS, MANDATING THE FISCAL INCENTIVE REVIEW BOARD 
TO OVERSEE THE ADMINISTRATION OF ALL FISCAL INCENTIVES 
ANDFOROTHERPURPOSES 
Be it enacted by the Senate and House of Representatives of the 
Philippines in Congress assembled. 
Section 1. Declaration of Policy. - It shall be the policy of the State 
to rationalize the fiscal incentives system to make it efficient, relevant 
and effective in promoting social and economic objectives, transparent, 
and simple to administer. The State shall provide the fiscal incentives 
without prejudice to the provision of basic services to the greater number 
of Filipinos. 
I t  shall uphold the preferential tax and duty treatment 
expressed in the Philippine Constitution, and those covered by the non- 
impairment clause of the Constitution, those conferred by international 
and regional agreements to which the Philippine Government is a 
signatory. 
Section 2. Repeal of Special Fiscal Incentive Laws and Provisions - 
The provisions of any general or special laws to the contrary 
notwithstanding, all tax and duty incentives granted to government and 
private entities under the following laws and / or provisions, are hereby 
withdrawn / repealed : 
1. Section 14 of Republic Act No. 7308 ( An Act to Promote and 
Develop the Seed Industry in the Philippines and Create a National 
Seed Industry Council and For Other Purposes ) 
2. Section 18 of Republic Act No. 7884 ( An Act Creating the National 
Dairy Authority to Accelerate the Development of the Dairy 
Industry in the Philippines, Providing for a Dairy Development 
Fund, and For Other Purposes ) 
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3. Sections 9 ( e ), ( f ), and (i) of Republic Act No. 7900 ( An Act to 
Promote the Production, Processing, Marketing and Distribution of 
High- Valued Crops, Providing Funds Therefor and For Other 
Purposes ) 
4. Sections 35 ( b ), ( c ) and ( d ) of Republic Act No. 8550 ( An Act 
Providing for the Development, Management and Conservation of 
the Fisheries and Aquatic Resources, Integrating all Laws Pertinent 
Thereto, and For Other Purposes ); 
5. Section 5 of Republic Act No. 8367 ( An Act Providing for the 
Regulation of the Organization and Operation of Non-Stock Savings 
and Loan Associations ); 
6. Sections 8 and 12 of Republic Act No. 8047 ( An Act Providing for 
the Development of the Book Publishing Industry through the 
Formulation and Implementation of a National Book Policy and a 
National Book Development Plan ) ; 
7. Section 14 of Republic Act No. 7354 ( An Act Creating the 
Philippine Postal Corporation, Defining its Powers, Functions and 
Responsibilities, Providing for Regulation of the Industry and For 
Other Purposes Connected Therewith ); 
8. Section 23 of Republic Act No. 7925 ( An Act to Promote and 
Govern the Development of Philippine Telecommunication and the 
Delivery of Public Telecommunications Services ) ; 
9. Sections 9 and 21 of Republic Act No. 7306 ( An Act Providing for 
the Establishment of the People’s Television Network, Inc. Defining 
its Powers and Functions, Providing for its Sources of Funding and 
For Other Purposes ) ; 
10. 
Sections 61 and 62 of Republic Act No. 6938 ( An Act to 
Ordain a Cooperative Code of the Philippines ); 
11. 
Section 9 of Republic Act No. 7355 ( An Act Providing for the 
Recognition of 
Living Treasures, Otherwise Known as the 
Manlilikha ng Bayan, and the Promotion and Development of 
Traditional Folk Arts, Providing Funds Therefor and For Other 
Purposes ) ; 
12. 
Section 21 of Republic Act No. 7356 ( An Act Creating the 
National Commission for the Culture and the Arts, Establishing a 
National Endowment Fund for Culture and the Arts, and For Other 
Purposes ); 
13. 
Section 25 of Republic Act No. 8492 ( An Act Establishing a 
National Museum System, Providing for its Permanent Home and 
For Other Purposes ); 
14. 
Section 16 of Republic Act No. 7844 ( An Act to Develop 
Exports as a Key Towards the Achievement of the National Goals 
Towards the Year 2000 ); 
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15. 
Section 10 of Republic Act No. 7079 ( An Act Providing for 
the Development and Promotion of Campus Journalism and For 
Other Purposes ) ; 
16. 
Sections 5, 6 and 7 of Republic Act No. 7459 ( An Act 
Providing Incentives to Filipino Inventors and Expanding the 
Functions of the Technology Application and Promotion Institute, 
Appropriating Funds Therefor and For Other Purposes ); 
17. 
Section 13 of Presidential Decree No. 1869 ( Consolidating 
and Amending Presidential Decree Nos. 1067-A, 1067-B, 1067-C, 
1399 and 1632 Relative to the Franchise and Powers of the 
Philippine Amusement and Gaming Corporation (PAGCOR) ); 
18. 
Section 13 of Republic Act No. 7600 ( An Act Providing 
Incentives to all Government and Private Health Institutions with 
Rooming-In and Breast Feeding Practices and For Other Purposes); 
Section 6 of Republic Act No. 7471 ( An Act to Promote the 
19. 
Development of Philippine Overseas Shipping ); 
20. 
Section 2 of Republic Act No. 9301 ( An Act Amending 
Certain Provisions of Republic Act No. 7471, entitled “An Act to 
Promote the Development of Philippine Overseas Shipping and For 
Other Purposes” ); 
21. 
Sections 4 and 19 of Republic Act No. 9295 ( A n  Act 
Promoting the Development of Philippine Domestic Shipping, 
Shipbuilding, Ship Repair and Ship Breaking, Ordaining Reforms 
in Government Policies Towards Shipping in the Philippines, and 
For Other Purposes ); 
22. 
Sections 18, 19 and 20 of Republic Act No. 6847 ( An Act 
Creating and Establishing the Philippine Sports Commission, 
Defining its Powers, Functions and Responsibilities, Appropriating 
Funds Therefor and For Other Purposes ) ; 
23. 
Paragraph 8 of Section 4 of Republic Act No. 9064 ( An Act 
Granting Cash and Other Non-Monetary Benefits and Incentives to 
National Athletes, Coaches and Trainers, Appropriating Funds 
Therefor and For Other Purposes ); 
24. 
Section 3 of Republic Act No. 9290 ( An Act Promoting the 
Development of the Footwear, Leather Goods and Tannery 
Industries, Providing Incentives Therefor and For Other Purposes); 
25. 
Section 18 of Republic Act No. 8044 ( An Act Creating the 
National 
Youth 
Commission, 
Establishing 
a 
National 
Comprehensive and Coordinated Program on Youth Development, 
Appropriating Funds Therefor, and For Other Purposes ); and 
26. 
Sections 13 and 17 of Republic Act No. 7820 ( An Act 
Creating the Partido Development Administration, Defining its 
Powers and Functions, Providing Funds Therefor and For Other 
Purposes ). 
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Section 3. Industries whose tax and duty incentives are herein 
withdrawn may qualify for fiscal incentives from the government if so 
listed in the Investment Priorities Plan ( IPP ) formulated by the Board of 
Investments for the purpose of granting fiscal, as well as non-fiscal, 
incentives under Executive Order No. 226 or the Omnibus Investments 
Code. 
Section 4. The Fiscal Incentives Review Board, created under 
Presidential Decree No. 776, is hereby mandated to oversee the 
administration of all fiscal incentives remaining in force. 
Section 5. If any provision of this Act shall be held to be 
unconstitutional or not valid, no other provision shall be affected 
thereby. 
Section 6. All laws, decrees, executive orders, administrative 
orders, regulations or parts thereof which are inconsistent with this Act 
are hereby repealed, amended or modified accordingly. 
Section 7. This Act shall take effect fifteen ( 15 ] days after its 
publication in the Official Gazette or in any two ( 2 ) newspapers of 
general circulation. 
Approved, 
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