SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
S.No. 1187 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
'13 
JUL -;l) 
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It is the policy of the State to attract, promote, and welcome productive investments from 
foreign individuals, partnerships, corporations, and governments, including their political 
subdivisions, in activities which significantly contribute to national industrialization and 
socioeconomic development to the extent that foreign investment is allowed in such activity by 
the Constitution and relevant laws. 
Likewise, it is the policy of the State to promote fiscal prudence and transparency in the 
proper administration and grant of tax incentives by developing means to measure the 
government's fiscal exposure from these foregone revenues and to enable the government to 
analyze and rationalize the fiscal cost and at the same time optimize the economic impact and 
benefit incidence of such incentives. 
Republic Act (R.A.) No. 7042 otherwise known as the Foreign Investments Act (FIA) of 
1991, as amended by R.A. 8179, is the basic law that governs foreign entities in economic and 
commercial activities in the Philippines. The FIA is considered a landmark legislation because it 
-opened the domestic market to' foreign investments and offered a broad array of tax breaks and 
incentives to businesses recognized as a preferred area of investment.! 
Investment Promotions Agencies such as the Board of Investments (BOl), Philippine 
Economic Zone Authority (PEZA) and Bases Conversion Development Authority (BCDA) are 
legally empowered to promote investments and grant incentives to investors registered with 
them. Department of Trade and Industry data shows a 35% increase in net foreign direct 
investments from US$ 1,816 Million in 2011 to US$ 2,797 Million in 2012.2 However, the bulk 
of tax incentives granted to these business entities are not accounted for. Hence, the magnitude 
of these incentives which translates to the government's foregone revenues remains largely 
unknown. Another problem brought by the lack of a monitoring system of the IP As is that they 
do not generate adequate information on the scope, cost, or effects on investment and the 
economy of these incentives. Thus, government efforts should be directed at improving, more 
broadly, the monitoring system for the tax incentives granted by the IP As and other government 
agencies so that the sectors benefiting from the reduced rate can be easily and objectively 
identified, to ensure transparency and avoid discretion on the part of the authorities. 
The proposed legislation's primary objective is to address this serious information gap in 
line with the President's 'Tuwid na Daan' advocacy_ The Department of Finance (DOF), in 
coordination with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), shall 
implement stricter monitoring procedures by. creating a Tax Incentives Tracking Program. 
Failure by the registered businesses to comply with the reportorial requirements shall be a 
ground for the suspension of the incentives that they enjoy for the particular taxable year, while 
repeated violation shall be a ground for the cancellation of the enterprise's registration. 
A consolidated annual Tax Incentive Report shall be snbmitted to the President and to the 
Chairmen of the Committees on Appropriations/Finance of both houses of Congress as part of the 
I Board of Investments. Primer of Doing Business in the Philippines. 2010. 
2 Department of Trade and Industry. Quickstats.2013_ 


annual Budget of Expenditures and Sources of Financing (BESF). Further, in order to enhance 
government accountability, the DOF, BIR and BOC, shall jointly conduct an annual evaluation 
to determine the impact ofthe tax incentives on the Philippine economy. 
With the foregoing considered, immediate approval of this bill is requested. 
RA 
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SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATE 
S.No. 1187 
'13 
IUL "0 
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Introduced by Senator Ralph G, Recto 
AN ACT 
ESTABLISHING A SYSTEM FOR TAX INCENTIVES TRANSPARENCY, AND FOR 
OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
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SECTION 1. Title, - This Act shall be known as "The Tax Incentives Transparency 
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Act." 
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SEC. 2. Declaration of Investment Policies. - It is hereby declared the policy ofthe State 
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to promote fiscal prudence and transparency in the proper management and grant of tax 
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incentives by developing means to measure the government's fiscal exposure from these 
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foregone revenues and to enable the government to analyze and rationalize the fiscal cost and at 
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the same time optimize the economic impact and benefit incidence of such incentives. 
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SEC. 3. Definition o.fTerms. - As used herein, the following shall mean: 
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(a) "Investment Promotions Agencies (IPAs)" shall refer to government entities created 
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by law, executive order, decree or other issuance, in charge of promoting investments, 
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administering tax and non-tax incentives, arid/or overseeing the operations of the different 
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economic zones and freeports in accordance with their respective charters. These include the 
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Board of Investments (BOI), Philippine Economic Zone Authority (PEZA), Bases Conversion 
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Development Authority (BCDA), Subic Bay Metropolitan Authority (SBMA), Clark 
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Development Corporation (CDC), Poro Point Management Corporation (PPMC), Bataan 
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Technology Park, Inc. (BTPI), Cagayan Economic Zone Authority (CEZA), Zamboanga City 
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Special Economic Zone Authority (ZCSEZA)" Phividec Industrial Authority (PIA), Aurora 
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Pacific Economic Zone and Freeport Authority (APECO), Authority of the Freeport Area of 
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Bataan (AF AB), Tourism Infrastructure And Enterprise Zone Authority (TIEZA), and all other 
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similar authorities that may be created by law in the future. 
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(b) "Other Government Agencies" shall refer to govermnent agencies other than IPAs 
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which administer tax exemptions of any kind to any specific entities and/or class of persons by 
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reason of any law. 
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( c) "Tax Incentives" shall refer to grants of fiscal incentives which come in the form of 
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income tax holiday, exemption, deduction, credit or exclusion from the tax base that is tied to a 
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specific provision in tax law to qualified firms relative to the nature of business or client location 
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and registration of the proposed investment project to entice foreign capital and technology that 
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complements local sources. 
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(d) "Tax Incentives Tracking Program" shall refer to the single database which shall be 
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used by the Department of Finance (DOF), Bureau of Internal Revenue (BIR), Bureau of 
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Customs (BOC) and Investment Promotions Agencies (IPAs) in monitoring the incentives 
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granted to IP A-registered business entities. 
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SEC. 4. Accounting of Tax Incentives. - The amounts pertaining to tax incentives 
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administered by IP As and other government agencies to private individuals and corporations 
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shall be specified in accordance with a schedule to be prepared by the Department of Finance 
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(DOF). Tax incentives administered by the relevant IP As andlor other government agencies shall 
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be reflected in the Tax Incentive Information provided in Section 5 of this Act. 
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SEC. 5. T.ax Incentive Information (TIl). - For purpo.ses of accounting and transparency, 
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a section shall be created in the annual Budget of Expenditures and Sources of Financing 
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(BESF), from which tax incentives, as may be determined by the IPAs and other government 
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agencies in accordance with law, are accounted. Notwithstanding the provisions of their 
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respective charters, IP As and other government agencies concerned shall acconnt in the TIl all 
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tax incentives granted. 
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SEC. 6. Administration, Implementation and Monitoring of Tax Incentives. - Registered 
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enterprises shall file a complete annual Tax Incentive Report to the IP As or government agencies 
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administering the grant of incentives. The IP As and other government agencies concerned shall 
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submit to the DOF their respective consolidated annual Tax Incentive Report reflecting the total 
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tax incentives granted to registered enterprises or to special groups, as the case may be, and other 
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data related to the grant of such incentives as may be required by the DOF. 
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In fulfilling the foregoing requirements, the IP As and other government agencies shall 
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also be subject to the power of the Commissioner to obtain information and to summon, examine 
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and take testimony of persons under Section 5 of the National Internal Revenue Code (NIRC) of 
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1997, as amended. 
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The DOF, together with the BIR and the BOC, shall create a Tax Incentives Tracking 
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Program of all tax incentives granted by the IPAs and oth(~r government agencies, monitor the 
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incentives granted, and submit an annual Tax Incentive Report to the President and to the 
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Chairmen of the Committees on Appropriations and on Finance of both houses of Congress as 
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part of the annual BESF. 
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The Tax Incentives Tracking Program shall be used by the DOF, BIR and BOC to 
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monitor tax incentives granted by the IP As and other government agencies; project tax incentives 
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for future years and to conduct an annual evaluation study to determine the impacts of the tax 
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incentives on the Philippine economy: Provided, That the monitot'ing function of the DOF, BIR 
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and BOC shall incorporate those companies whose incentives have expired in order to assess 
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whether tax incentives in the Philippines provide benefits that extend beyond the duration of the 
incentives. 
SEC. 7. Non-compliance with Reportorial Requirements and Penalties. - The failure of a 
registered enterprise to submit a complete annual Tax Incentive Report shall prompt the IPAs or 
other government agencies concerned to declare immediate suspension ofthe incentives that they 
enjoy for the particular taxable year. Repeated violation shall be penalized with the cancellation 
of the enterprise's registration. 
The DOF shall issue to the IP As or otller government agencies concerned a notice of non-
compliance with this Act and its implementing rules and regulations, and direct the latter to 
explain its failure to comply and the actions it took to address such failure. If the failure can be 
attributable to the fault of a registered enterprise, the IP As or other government agencies 
concerned, shall state such fact in its explanation, attach supporting documents (such as official 
requests for submission), and cause the issuance of a notice of violation of registration terms and 
conditions against the registered enterprise. 
The erring registered enterprise shall then be subject to the aforementioned penalties, the 
tenns of and procedure for which shall be prepared by the IP As and other government agencies 
for inclusion in the implementing rules and regulations of this Act, in addition to the applicable 
penalties provided for under the NIRC of 1997, as amended. 
SEC. 8. Implementing Rules and Regulations. - The DOF, in coordination with the 
DBM, BIR and BOC, and in consultation with all IP As and other government agencies 
concerned, shall, within sixty (60) days from the effectivity of this Act, jointly promulgate rules 
and regulations to implement the provisions of this Act. 
SEC. 9. Separability Clause. - In the event iliat any provision of this Act is declared 
invalid, the other provisions of ilie Act which are not affected thereby shall remain in force and 
effect. 
SEC. 10. Effectivity. - This Act shall take effect fifteen (15) days from the date of 
publication in the Official GaZette or in at least two (2) newspapers of general circulation. 
Approved, 
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