The Philippines can maximize the potential of geothermal development in the country if the Renewable Energy (Law) is exempted from the coverage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
This according to the National Geothermal Association of the Philippines (NGAP). In its position paper, exemption of RE from the coverage of the second package of the TRAIN Act can preserve its status as a premiere investment destination for geothermal energy developers.
NGAP also expressed its reservation on the execution of a “unified menu of fiscal incentives that runs contrary to the purpose of the RE Law to accelerate the development of renewable energy resources such as geothermal energy.”
NGAP also claimed that TRAIN 2 will further decrease the competitiveness of the country in attracting investors in geothermal energy due to the current proposal to apply a single menu of the incentives that may not be responsive to the needs of the country.
Under TRAIN 2, the incentives proposed include income tax holiday applicable only for the first five year of commercial operations and for a period not exceeding three years; corporate income tax (CIT) rate of 15 percent based on net taxable income; duty-free importation on raw materials and capital equipment in the first five years; removal of the VAT incentives and special realty tax rates; and repeal of the net operating loss carry-over, accelerated depreciation, tax exemption on carbon credits, tax credit on domestic capital equipment and cash incentives for missionary electrification
NGAP said it recognizes TRAIN 2 as a needed change to manage tax leakages but the government should maintain a balance between revenue generation and the long-term outlook for geothermal development.
“Success of geothermal energy development is intricately linked with effective government energy policies, predictable rules and regulations, simple and coordinated permitting process, and a competitive set of incentives that promote geothermal investments,” it said.
“A sudden change in the existing fiscal incentives regime for the geothermal energy industry will affect investor confidence since investors seek consistency, predictability, and transparency,” the group said.