PE2 submits IRR position on BIR role in grant of fiscal incentives under EE&C Act

TAGUIG CITY, 7 August 2019 – The Philippine Energy Efficiency Alliance (PE2) officially submitted earlier today a new position letter to Secretary Alfonso G. Cusi of the Department of Energy (DOE), which transmits its comments on the role of the Bureau of Internal Revenue (BIR) in the granting of fiscal incentives to energy efficiency projects under Republic Act 11285, otherwise known as the Energy Efficiency and Conservation (EE&C) Act.

The latest PE2 comments were intended to support the ongoing review of the draft Implementing Rules and Regulations (IRR) of the EE&C law, specifically processed by Focus Group G organized by the Energy Utilization and Management Bureau (EUMB) of DOE.

PE2 said that while the Alliance finds the language of Article 56(b), Rule XI of the 26 July 2019 draft IRR generally acceptable, there is an urgent need to address a concern on BIR’s involvement in the grant of incentives under the IRR of the EE&C Law. In particular, it was raised that energy project entities registered with the Board of Investments (BOI) had past experiences wherein the BIR’s revenue district offices (RDOs) refused to recognize outright the incentives granted to BOI-registered entities for lack of an appropriate revenue regulation/revenue memorandum circular issued by the BIR. As a result, the BOI-registered taxpayers were assessed taxes at a regular rate (i.e. no incentives) and were compelled to pay the same while awaiting a ruling to be issued by the BIR on its eligibility for incentives. PE2 is worried that the BIR ruling on the incentives takes a long time (e.g. sometimes even a year or longer) due supposedly to the quick turn-over of the BIR employees handling such request for rulings.

On the clear grounds that the EE&C Act provides no legal basis, PE2 raised its objection to the proposal to include the following language in the IRR: “the final ruling/approval for fiscal incentives is being handled by the BIR.” PE2 emphasized that Section 25 of the EE&C law does not, in any way, include the BIR in the process of granting incentives.

In order to address the legitimate concern raised of prompting RDOs to immediately recognize the incentives granted under Section 25 of the EE&C Law, PE2 proposed the following insertion in [Rule XI] Section 56 (b) of the IRR: “Within thirty (30) days from the issuance of this IRR, the DOE, BOI, BIR and DOF shall convene for the issuance by the BIR of the appropriate Revenue Memorandum Order for the recognition of the incentives granted under the Act and this IRR, which shall be in compliance with the Anti-Red Tape Act of 2007, as amended.”

PE2 believes that this proposed language will be sufficient to prompt the BIR to issue the appropriate regulations for the immediate recognition of the incentives in accordance with Section 25 of the EE&C Law, without imposing additional approval which is not sanctioned or required by law. Reference to the Anti-Red Tape Act of 2007 (“ARTA Law”) also seeks to ensure that the recognition of incentives shall in no case exceed the maximum of forty (40) days required under the ARTA Law.

PE2 provided copies to the relevant officials, bureau and division of DOE, as well as the BOI and the secretariats of the Committee on Energy of both chambers of the 18th Congress.