LCP Dialogue with National Agencies: Department of Finance*

On the proposed rationalization of fiscal incentives

Undersecretary Jeremias N. Paul, Jr. lauded proposals of several city mayors to look for alternative sources of local income in light with the recent decrease of LGU Internal Revenue Allotment (IRA) shares. He shared that there is a bill pending (HB 4152, An Act Rationalizing the Grant and Administration of Fiscal Incentives for the Promotion of Investments and Growth and for other purposes) in Congress that seeks to rationalize fiscal incentives given to businesses and investors. He said that by streamlining the process of providing incentives, government would be able to increase the taxes collected from the private sector. Seeing the need to further understand the nuances of this proposition, LCP President Mayor Rodriguez tasked the Secretariat to thoroughly study the bill. This would also help in determining the League’s position on the bill.

On excise tax reform

Another other proposal is the bill seeking to reform the excise tax structure. Currently, the country uses a multi-tiered tax system for alcohol and tobacco-based products. Further, it uses the 1996 index of retail prices to determine the tax rates for older brands. Such structure contributes to a flawed system of taxing these ‘sin’ goods. With this, DOF pushed for the reformed excise tax structure as it would primarily calibratethe prices of these sin goods to the current inflation index, thus an increase in government revenue. Recently, the bill was approved on the House Committee Level. DOF thanked LCP for supporting the bill.

On Real Property Valuation and DOF LGU Interventions

City mayors have also reiterated the perspective that the valuations used to appraise real properties are outdated, resulting to significant losses for most LGUs in terms of Real Property Tax Collection. Undersecretary Paul, in response, said that they are pushing for more trainings and capacity development seminars for assessors and land evaluators. He also assured the city mayors that measures are made to update current valuations. Finally, DOF intends to help LGUs through three levels: in terms of policy enhancements, direct technical assistance, and opportunities for financing.

Source: LCP Policy Notes, Vol. 1, Series of 2012