ROSARIO, Cavite, Philippines – The Department of Trade and Industry (DTI) is studying a proposal to allow firms catering to the domestic market to locate in the Philippine Economic Zone Authority’s (PEZA) economic zones.
Trade Secretary Gregory Domingo said in a press conference during the tour of CS Garment, Inc.’s facility yesterday the DTI is looking into a proposal from the PEZA to have firms catering to the domestic market locate in the agency’s economic zones.
“We’re actually in the midst of formulating a policy, but I don’t know how long it will take,” he said, noting that details on the taxation have to be ironed out.
At present, locators in the PEZA’s ecozones are required to have the bulk or 70 percent of their production for export.
When PEZA-registered firms sell goods to the domestic market within the 30 percent limit, they pay only the duties and taxes on the imported raw material.
Domingo said there is a need to study the tax treatment to ensure a level playing field as firms from Southeast Asia could export goods to the country at zero duty.
“If we assess them (firms catering to the domestic market) the regular duty rate, then we are in fact handicapping our own enterprises against our Asean (Association of Southeast Asian Nations) neighbors because they could come in duty-free,” he said.
PEZA director general Lilia De Lima told reporters the government is considering providing an incentive of five percent levy on gross income earned in lieu of all national and local taxes and duties to firms catering to the domestic market that would locate in the agency’s economic zones.
“We are still discussing it,” she said.
She also said that if firms catering to the domestic market would be allowed to operate in PEZA zones, the government would want such enterprises to locate in less developed areas to create jobs there.
“There are many foreign companies that want to come here and manufacture for the domestic market,” she added.
The proposal is being studied amid recommendations from the Joint Foreign Chambers to establish Domestic Economic and Export Zones managed by the PEZA, which would be open even to firms producing for the domestic market.
The recommendation was made to spread out manufacturing activities and support the goal of inclusive economic growth.