Davao scraps tax incentives to new businesses

DAVAO CITY, Philippines—The steady decline in the city’s internal revenue allotment  due to the creation of many more new cities has forced the city government to end the practice of giving tax incentives to new businesses, an official said Monday.

Jason Magnaye, head of the Davao City Investment and Promotion Center, said the city government was eyeing a P300-million reduction in its IRA this year and the only way to cope with it is to stop giving tax incentives.

The city’s projected IRA for 2012 is P2.4 billion,  or a decrease of P359 million from last year’s.

By stopping tax incentives to new businesses, Magnaye said, the city government could increase its income to finance more projects and expenditures.

The city government’s budget for this year is about P4.1 billion. About half of the budget proposal is funded from the IRA that the city government stands to receive this year.

In lieu of the tax incentives, Magnaye said, the city would push for other stimuli to entice investments.

In September, the city’s financial managers will also be meeting to review the outcome of the tax incentive suspension, he said.

Magnaye said that despite the suspension of tax incentives, the outlook for investments in the city remained rosy. In 2011, total investments reached P187 billion and for this year, it was projected to increase.

He said the city’s main investment attractions were property development, business process outsourcing, and the tourism sector.