October 07, 2013

Fiscal incentives rationalization will not be retroactive

Finance secretary Cesar Purisima was quoted by the Inquirer as saying government will honor all unexpired tax incentives granted to companies and that the proposed Fiscal Incentives Rationalization Bill will not have a retroactive effect. He was allaying fears that government will be changing the rules midstream with the passage of the bill filed in Congress.

Our take: Secretary Purisima’s comments come timely and should help allay concerns regarding the consistency of government’s economic policies. However, we believe that the planned policy changes in the grant of fiscal incentives may have a potential impact on property developers which are required under the law to offer mass housing.

For instance, horizontal housing development projects (including socialized housing) require significant investments especially for land banking. To render the investments profitable, tax perks may be required to compensate for lower margins from these activities. - WealthSec