BIR Ruling [DA-292-00]

July 25, 2000 BIR RULING [DA-292-00] Hon . Antonio F. Corrado Assistant Secretary for Legislation Presidential Legislative Liaison Office Malacaang S i r : This refers to your letter dated June 23, 2000 requesting our comments and recommendations on House Bill No. 8301 entitled: " AN ACT PROVIDING FOR TAX CREDITS AS REPAYMENT TO PROPONENTS OF INFRASTRUCTURE PROJECTS WHO ADVANCE THE FUNDS NEEDED BY GOVERNMENT TO ACQUIRE THE RIGHT-OF-WAY THEREFOR " The Bureau of Internal Revenue recognizes the good intention of H.B. No. 8301 to lend support to private proponents who will advance the funds needed for the acquisition of Right of Way in the implementation of infrastructure projects by being assured of repayment of their advances to the Government. However, we do not conform with the proposal to grant tax credit to private proponents as repayment for their advances for the Right of Way. Tax credits are given if there had been previous tax payments which the government is required to return to the taxpayer. The proposal, in effect, is not a tax credit but a cash subsidy with open-ended amounts because the government will provide a subsidy equivalent to the advances given by the private proponents. Because of this subsidy feature, the proposed grant of tax credit will have to be covered by an appropriation from Congress to be valid. Accordingly, there is a need to evaluate the merits and effectiveness of the proposed tax credit taking into account its impact on tax administration and government finances. TIHDAa Moreover, even without the tax credit proposal, the private proponents can claim the advances they made as expenses which can be deducted from their income and therefore not included in the computation of taxable income. The proposal of the bill is therefore, no longer necessary. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group