The Philippines: IPP draft eases rules for ‘strategic’ firms

The Philippines: IPP draft eases rules for ‘strategic’ firms
Published: 16 February 2010

The Government’s proposed framework for the 2010 list of business activities eligible for tax perks will ease the requirement for firms seeking to be qualified as "strategic."

The policy shift should help the Philippines take advantage of firms’ investment decisions amid the recovery of the global economy, according to a draft released for public hearing yesterday at the Board of Investments (BoI).

New entries in the 2010 Investment Priority Plan (IPP) also seek to encourage activities that will enable firms to recover from and prepare for the impact of climate change after two storms wrought billions of pesos worth of damage last year.

Instead of requiring a minimum cost to qualify as was the case in previous IPPs, a project can qualify for tax incentives if it accomplishes any three of the following:
    •    a minimum US$300minvestment cost
    •    employment generation of at least 1000
    •    the use of new and internationally accepted high level of technology
    •    creation of value-added.
This means a project that costs less than the minimum US$300 prescribed in earlier IPPs can still qualify for perks if it fulfills the three other requirements listed above.

But even with this proposed easing, the Philippine Economic Zone Authority (PEZA) petitioned for a lower minimum investment cost.

"Disaster prevention, mitigation and recovery projects" would also qualify for incentives this year under the proposed IPP. This covers the installation of flood control systems, early warning systems, dikes, projects to rebuild roads and bridges, and training for disaster preparedness.

Other new entries include the manufacture of cement, operation of provincial buses, and any new project of micro and small enterprises.

The Cement Manufacturers Association of the Philippines (CeMAP) President Ernesto M. Ordoñez, meanwhile, opposed the listing of cement manufacture.

The majority of CeMAP members, he said, are against the grant of tax perks to new entrants as it is unfair to existing cement industry players.