Philippines Breaks Out IT Investment Incentives

MANILA (08/02/2000) - The Philippine government has finally separated information technology (IT) from the electronics sector in its investments and trade classification, paving the way for greater economic activity in this growth industry.

Based on the country's Investments Priorities Plan (IPP) for Year 2000, which President Joseph Estrada signed last month, the IT sector is a pioneer area where qualified players can take advantage of key incentives such as income tax holidays (ITH)Under the new IPP, domestic-oriented IT projects are entitled to the same perks as export-oriented IT projects. Pioneer projects under the IPP are entitled to the eight-year ITH incentive, among others. Non-pioneer projects are entitled to a six-year ITH.

Among the IT projects that can be considered for incentives are the following:

Software development (system and application software, middleware); IT-enabled services; Support- and knowledge-based services; Business process outsourcing.

Trade and Industry Secretary Manuel Roxas said the government has also carved out IT, ICT (information communication technology) and e-commerce as a special category in a bill that is currently being discussed in Congress. "There is a pending bill now that seeks to provide 12-year ITH as well as net operating cost carry-over on top of other incentives and special exemptions for IT, ICT and e-commerce," Roxas said.

The secretary also suggested that the output of the IT sector no longer be lumped under the "general services" item in the national revenue report. "If we can't measure it (IT's sole output), how can we provide targets? IT's output must be measured separately," Roxas added.

Meanwhile, he said there is "a building confluence of efforts to focus on IT, ICT and e-commerce as the main engine of national growth and development." The president, he added, is now even adopting IT, ICT and e-commerce as the central business theme for his speeches here and abroad.

"This sector provides the country its next best hope for its people to create for themselves a prosperous life," Roxas said.

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