Renato Reside Jr., Ph. D.

March 2006

FISCAL INCENTIVES ABD INVESTMENT IN THE

PHILIPPINES

DISCLAIMER

“The views expressed in this report are strictly those of the authors and do not necessarily reflect those of the United States Agency for International Development (USAID) and the Ateneo de Manila University”.

Abstract This newsletter discusses main points of EPRA’s major study on the current system of fiscal incentives in the country. The study finds that a large amount of fiscal incentives being provided to corporations in the Philippines are redundant – they are given to many firms that would have invested anyway without them. The newsletter explains the redundancy, its costs to the country, and the failure of current fiscal incentives to spur investment, target the right set of investors, and their insignificance in the location decisions of investors. The discussion includes reforms that must be made to rationalize fiscal incentives and lighten the load for all.