Fiscal incentives enjoyed by favored firms cost the government P481.7 billion in lost revenue in 2019, or a year before the adoption of the law that ultimately implemented reforms in the corporate income tax (CIT) system, according to the Department of Finance (DoF).

Finance Secretary Carlos Dominguez 3rd said in a statement released by his agency on Monday that this significant amount already represents a reduction from the P518.7 billion in tax breaks given out by the government in 2018 through various investment promotion agencies (IPAs) and fiscal incentives granted to cooperatives.

Citing a report of its Domestic Finance Group (DFG), the DoF added that of the P481.7 billion in incentives awarded to a select set of firms in 2019, P149.28 billion, or about a third of the total, were in the form of income tax incentives, according to a report by its Domestic Finance Group (DFG).

The income tax holiday (ITH) is worth P68.4 billion (14.2 percent); the special income tax rate for IPA-registered enterprises is worth P66.41 billion (13.8 percent); and income tax incentives for cooperatives are worth P14.47 billion (3 percent), Assistant Secretary Ma. Teresa Habitan of the DFG highlighted.

She said that the incentives for the value-added tax (VAT) amounted for P283.45 billion (58.8 percent); customs duty exemptions, P47.59 billion (9.88 percent); and the percentage tax incentive available to cooperatives, P1.38 billion (0.29 percent).

The Finance department study looked at 11,431 businesses that filed tax returns, with 5,749 of them being IPA-registered businesses and 5,682 being cooperatives.

According to Habitan, 3,083 IPA-registered enterprises and 4,371 cooperatives took advantage of income tax incentives.

This amounts to 7,454 businesses, or 57.5 percent of the 11,431 businesses that received tax breaks, she also emphasized.

These lost tax incentives earnings, the DoF said are based on benefits given to registered businesses prior to the Corporate Recovery and Tax Incentives for Enerprises Act’s (Create) passage.

The grant and administration of incentives have been streamlined under Create to ensure that the benefits gained by registered businesses benefit the economy, it underscored.