DOF to PE2: Let BOI decide on upgrading of CREATE perks for EE projects

Date Published: 
November 24, 2021
  • Finance Secretary Carlos G. Dominguez delivering a speech as head of the PH delegation at the recent COP26 meetings in Glasgow. (Photo: Rappler)
    Finance Secretary Carlos G. Dominguez delivering a speech as head of the PH delegation at the recent COP26 meetings in Glasgow. (Photo: Rappler)

MANILA, 24 November 2021 – Finance Secretary Carlos G. Dominguez informed Philippine Energy Efficiency Alliance (PE2) president Alexander Ablaza earlier today that the Department of Finance (DOF) and the Fiscal Incentives Review Board (FIRB) defer to the decision of the Board of Investments (BOI) on the PE2-proposed reclassification of energy efficiency (EE) projects as part of the latter’s emerging Strategic Investment Priorities Plan (SIPP) under the  Republic Act (RA) 11534, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Sec. Dominguez’ statement was contained in an official DOF reply to PE2 issued today in response to the PE2 letter to the Finance Department on 12 November 2021, which proposes and provides justification for the reclassification of EE projects from Tier I activity to Tier III within the income tax holiday (ITH) incentives for domestic market activities provided under the CREATE-SIPP framework, and in support of the fiscal incentive provisions of RA 11285, better known as the Energy Efficiency and Conservation Act.

The DOF chief said, “We defer to the BOI on the reclassification of EE projects from Tier I to Tier III. They shall review the current SIPP and consider recent developments in the industry using the criteria for investment priority determination. Based on this, they shall adopt reasonable and justifiable positions of the private sector and other related government agencies.”

Sec. Dominguez explained that the grant of tax incentives under the CREATE Act is limited to Tier I while the SIPP is being formulated for approval by the President. This transitional classification however may be upgraded for certain economic activities if qualified under the emerging SIPP.

DOF explained that existing and recent policies sufficiently provide for the formulation of the SIPP by the BOI, in coordination with FIRB, investment promotion agencies (IPAs), other government agencies administering tax incentives, and the private sector. In addition, the Finance Department made it clear that Rule 4, Section 8 of the CREATE implementing rules and regulations provides that, subject to publication requirements and the criteria for investment priority determination, the BOI may, at any time, include additional areas in the SIPP, alter any of the terms of the declaration of an investment area, and temporarily suspend projects or activities therein if it considers that such project or activity is no longer a priority within the effectivity of the SIPP.

Relatedly, Sec. Dominguez told Ablaza, “I invite your organization to look into my other speeches on energy efficiency projects and climate change. As mentioned in these statements, climate finance should aspire for a sustainable orchestration of the three elements of grants, investments, and subsidies. It is not all about fiscal incentives.” Differentiating these three elements, the DOF chief explained that grants may be used to improve the capacity of local communities in climate-vulnerable areas to undertake mitigation and adaptation measures. These grants should come in the form of educational or technical assistance programs to help people conceive of and execute localized projects, while investments focus on adaptation and mitigation programs, projects and activities that are bankable and will yield high returns. The third element is subsidies, which are meant to support initiatives leading to the transition to acclimate-resilient economy. This should address the financial costs and risks of such adjustments.

Having recently led the Philippine delegation to the 26th Conference of Parties (COP26) meetings in Glasgow, Sec. Dominguez added that the bulk of climate finance “should be sourced from those who have emitted and continue to emit the most greenhouse gases – they must bear the largest financial burden in this transition to carbon neutrality.” He added, “This was our urgent call to global leaders during the UN Climate Change Conference.”

About PE2

Philippine Energy Efficiency Alliance Inc. (PE2), is a non-stock, non-profit organization of energy efficiency market stakeholders.

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Republic Act 11285

R.A. 11285 - An Act Institutionalizing Energy Efficiency and Conservation, Enhancing the Efficient Use of Energy, and Granting Incentives to Energy Efficiency and Conservation Projects

RA 11285 - Text

RA 11285 - Signed

IRR - Signed

Beyond COVID-19: How governments, ESCOs and innovative financial modalities can mobilize energy efficiency capital through 2040

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