Republic of the Philippines

HOUSE OF REPRESENTATIVES

CONGRESS OF THE PHILIPPINES
Quezon City, Metro Manila

SEVENTEENTH CONGRESS
Third Regular Session

House Bill No, 1974

Introduced by Honorable REYNALDO V. UMALI

EXPLANATORY NOTE

The proliferation of laws and policies granting tax incentives to different sectors
and entities - resulting in considerable foregone revenue for government -
warrants compelling justification and proof of the effectiveness of these
incentives in terms of generating the expected growth and socio-economic
development of the covered sectors. At present, there are more than 300 tax
incentive provisions found in various special laws and the National Internal
Revenue Code of 1997, as amended, which are aimed to either stimulate
investment or enhance social benefits. While there is acknowledgment of the
noble purposes of these policies, there should likewise be an evaluation of
these incentives in order to ensure that the right types of subsidies are in place
and serving their purpose.

Non-investment incentives are especially important since there is a need to
identify the link between the provision of tax concessions and the delivery of
social services vis-a-vis collecting the revenues and using the same to provide
for the needs of the concerned sectors through direct subsidy. These sectors
include, among others, the cooperatives, non-government organizations, state
universities, and privileged individuals and entities.

The proposal to include the tax incentives data of the above-mentioned sectors
within the ambit of the TIMTA (Tax Incentives Management and Transparency
Act) or RA No. 10708 is deemed a necessary move to improve the tax treatment
of these sectors and the tax system as a whole, and to gather the essential
information and data that will enable more in-depth analysis of the needs and
requirements of the sectors.

In view of the foregoing, approval of this

Representative
2nd District, Oriental Mindoro


Republic of the Philippines
HOUSE OF REPRESENTATIVES
CONGRESS OF THE PHILIPPINES

Quezon City, Metro Manila

SEVENTEENTH CONGRESS
Third Regular Session

House Bill No. 7974

Introduced by Honorable REYNALDO V. UMALI

AN ACT AMENDING REPUBLIC ACT NO. 10708, OTHERWISE KNOWN AS THE
“TAX INCENTIVES MANAGEMENT AND TRANSPARENCY ACT’, EXPANDING
ITS COVERAGE TO ENHANCE FISCAL TRANSPARENCY AND
ACCOUNTABILITY, AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines
in Congress assembled:

SECTION 1. Section 3 (a) and (b) of TIMTA is hereby amended to read as
follows:

“a. Investment Promotion Agencies (IPAs) shall refer to government
entities created by law, executive order, decree or other issuance, in
charge of promoting investments, administering tax and non-tax
incentives, and/or overseeing the operations of the different economic
zones and freeports in accordance with their respective charters. These
SHALL include, BUT NOT LIMITED TO, the Board of Investments
(BOI), REGIONAL BOARD OF INVESTMENTS-AUTONOMOUS REGION
IN MUSLIM MINDANAO (RBOI-ARMM), Philippine Economic Zone
Authority (PEZA), Bases Conversion and Development Authority (BCDA),
Subic Bay Metropolitan Authority (SBMA), Clark Development
Corporation (CDC), John Hay Management Corporation (JHMC), Poro
Point Management Corporation (PPMC), [Bataan Technology Park, Inc.
(BTPI)] Cagayan Economic Zone Authority (CEZA), Zamboanga City
Special Economic Zone Authority (ZCSEZA), Phividec Industrial
Authority (PIA), Aurora Pacific Economic Zone and Freeport Authority
(APECO), Authority of the Freeport Area of Bataan (AFAB), Tourism
Infrastructure and Enterprise Zone Authority (TIEZA), and all other
similar authorities that may be created by law in the future;

b. Tax incentives shall refer to fiscal incentives such as those which
come in the form of income tax holidays (ITH), exemptions, deductions,
credits or exclusions from the tax base, as provided by law, to registered
business entities AND OTHER REGISTERED ENTITIES; [and]


SEC.

2. Section 3 is hereby amended to insert new subsections (d) and (e), as.

follows:

SEC.

"D. OTHER REGISTERED ENTITY SHALL REFER TO ANY
INDIVIDUAL, PARTNERSHIP, ORGANIZATION, CORPORATION,
PHILIPPINE BRANCH OF A FOREIGN CORPORATION, OR OTHER
ENTITY INCORPORATED AND/OR ORGANIZED AND EXISTING
UNDER PHILIPPINE LAWS, AND REGISTERED WITH OTHER
GOVERNMENT AGENCIES (OGA) ADMINISTERING TAX INCENTIVES.

E. OTHER GOVERNMENT AGENCIES ADMINISTERING TAX
INCENTIVES (OGA) SHALL REFER TO GOVERNMENT AGENCIES
OTHER THAN IPAs WHICH ADMINISTER TAX INCENTIVES OF ANY
KIND TO ANY SPECIFIC ENTITIES AND/OR CLASS OF PERSONS
PURSUANT TO ANY LAW. THESE SHALL INCLUDE BUT NOT
LIMITED TO THE COOPERATIVE DEVELOPMENT AUTHORITY
(CDA), DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT
(DSWD), COMMISSION ON HIGHER EDUCATION (CHED), BUREAU
OF INTERNAL REVENUE (BIR) AND OTHERS.”

3. Section 4 of the TIMTA is hereby amended to read as follows:

“SEC. 4. Filing of Tax Returns and Submission of Tax Incentives Reports. -
All registered business entities AND OTHER REGISTERED ENTITIES,
WHETHER TAXABLE OR EXEMPT, are required to file their tax returns
and/OR pay their tax liabilities, on or before the deadline as provided
under the National Internal Revenue Code (NIRC), as amended, using the
electronic system for filing and payment of taxes of the Bureau of
Internal Revenue (BIR). PROVIDED, THAT FOR PURPOSES OF
COMPLYING WITH THEIR TAX OBLIGATIONS, OTHER REGISTERED
ENTITIES WITHOUT ACCESS TO THE ELECTRONIC FACILITIES
SHALL FILE WITH THEIR RESPECTIVE REVENUE DISTRICT
OFFICES (RDOs).

For registered business entities AND OTHER REGISTERED ENTITIES
availing of incentives administered by the IPAs AND OGAS, they shall file
with their respective IPAs OR OGAS a complete annual tax incentives
report of their income-based tax incentives, value-added tax and duty
exemptions, deductions, credits or exclusions from the tax base,
INCLUDING EXEMPTIONS FROM LOCAL TAXES, as provided in the
charter of the IPA concerned AND RESPECTIVE LAWS, within thirty (30)
days from the statutory deadline for filing of tax returns and payment of
taxes.

The IPAs AND OGAS, shall within sixty (60) days from the end of the
statutory deadline for filing of the relevant tax returns, submit to the
BIR, their respective annual tax incentives reports based on the list of
the registered business entities who have filed said tax incentives report.


The details of the tax incentives reports, as provided in the preceding
paragraphs, shall be provided in the implementing rules and regulations
(IRR) of this Act.

‘The foregoing provisions shall be without prejudice to the right of the BIR
and the Bureau of Customs (BOC) to conduct assessment within the
prescribed period provided in the NIRC, as amended, and the [Tariff and
Customs Code of the Philippines (TCCP)] CUSTOMS MODERNIZATION
AND TARIFF ACT (CMTA), respectively.

SEC. 4. Section 5 of the TIMTA is hereby amended to read as follows:

“SEC. 5. Monitoring of Tax Incentives. - The BIR and the BOC shall
submit to the Department of Finance (DOF), notwithstanding any law to
the contrary: (a) the tax and duty incentives of registered business
entities AND OTHER REGISTERED ENTITIES as reflected in their filed
tax returns and import entries; and (b) actual tax and duty incentives as
evaluated and determined by the BIR and the BOC.

The DOF shall maintain a single database for monitoring and analysis of
tax incentives granted.

For purposes of monitoring and transparency, the DOF shall submit to
the Department of Budget and Management (DBM) the aggregate data on
a sectoral and per industry basis of: (1) the amount of tax incentives
availed OF by registered business entities AND OTHER REGISTERED
ENTITIES; (2) the estimate claims of tax incentives immediately
preceding the current year; (3) the programmed tax incentives for the
current year; and (4) the projected tax incentives for the following year.
Such information shall be given to the Oversight Committee created
under Section 9 of this Act.

The aforesaid data shall be reflected by the DBM in the annual Budget of
Expenditures and Sources of Financing (BESF), which shall be known as
the Tax Incentives Information (TII) section: Provided, That the TII shall
be limited to the aggregate data related to incentives availed of by
registered business entities AND OTHER REGISTERED ENTITIES based
on the submissions of the DOF and the concerned IPAS AND OGAS,
categorized by sector, by IPA OR OGA and BY type of incentive.

Nothing in this Act shall be construed to diminish or limit, in whatever
manner, the amount of incentives that IPAs OR OGAS may grant
pursuant to their charters and existing laws; or to prevent, deter, or
delay the promotion and regulation of investments, processing of
applications for registrations, and evaluation of entitlement of incentives
by IPAs OR OGA.”

SEC. 5. Section 6 of the TIMTA is hereby amended to read as follows:


“SEC. 6. Conduct of Cost-Benefit Analysis on Investment Incentives. The
FISCAL INCENTIVES AND REVIEW BOARD (FIRB) [National Economic
and Development Authority (NEDA)] is mandated to conduct cost-benefit
analysis on the investment AND NON-INVESTMENT incentives to
determine the impact of tax incentives on the RELEVANT SECTOR AND
THE Philippine economy.

For this purpose, all heads of the IPAs AND OGAS shall submit to the
FIRB [NEDA]: (1) the aggregate tax incentives[,] based on the
submissions of registered business entities AND OTHER REGISTERED
ENTITIES, as provided in Section 4 of this Act; and (2) THE aggregate
investment AND NON-INVESTMENT-related data [both on a sectoral or
per industry basis] PER REGISTERED ENTITY OR ACTIVITY, which
SHOULD [may] include, but not limited to, APPROVED AND ACTUAL
investment [projects, investment] cost, APPROVED AND actual
employment GENERATED, [and] export SALES [earnings], PROFIT,
RETAINED EARNINGS, DIVIDENDS PAYOUT, TAXES PAID PER TYPE
OF TAX, DOMESTIC VALUE-ADDED AND FISCAL AND OTHER
SOCIO-ECONOMIC BENEFITS.

SEC. 6. Section 7 of the TIMTA is hereby amended to read as follows:

“SEC. 7. Penalties for Noncompliance with Filing and Reportorial
Requirements Any registered business entity OR REGISTERED
ENTITY which fail[s] to comply with filing and reportorial requirements
with the appropriate IPAs OR OGAS and/or which faills] to show proof
of filing of tax returns using the electronic system for filing and payment
of taxes of the BIR shall imposed the following penalties BY THE
APPROPRIATE IPA OR OGA:

a. xxx
b. xxx

c. Third (3) violation - cancellation of the registration WITH THE IPA
OR OGA [of the registered business entity].

Provided, That if the failure to show such proof is not due to the fault of
the registered business entity OR OTHER REGISTERED ENTITY, the
same shall not be a ground for the suspension of the ITH and/or other
income-based tax incentives availment. PROVIDED FURTHER, THAT
COLLECTIONS FROM THE PENALTIES SHALL ACCRUE TO THE
GENERAL FUND.

20K’

SEC. 7. Repealing Clause. - All other laws, acts, presidential decrees, executive
orders, issuances, presidential proclamations, rules and regulations, or parts
thereof which are contrary to or inconsistent with any provision of this Act are
hereby repealed, amended, or modified accordingly.


SEC. 8. Bffectivity. - This Act shall take effect fifteen (15) days after its
publication in a newspaper of national circulation.

Approved,