PEZA, CEZA at odds over fiscal perks

MANILA, Philippines — With ongoing moves to overhaul fiscal perks under the second tax reform package, investment promotion agencies (IPAs) remain at odds over the importance of these incentives in attracting foreign investors.

The Cagayan Economic Zone Authority (CEZA) said fiscal incentives are not the top of mind consideration for foreign investors, while the Philippine Economic Zone Authority (PEZA) said perks offered by the government are the main reason foreign industries have chosen the country as their investment destination.

“Fiscal incentive is one of the last thing that a rational investor would like to have,” said CEZA administrator and CEO Raul Lambino, noting that peace and order, stability of policy, infrastructure and entertainment come first.   

“If you’re talking about investor confidence in an area, I am  no believer in fiscal incentives as a factor to attract investments. I do believe in the four factors that investors will always consider. Of course, fiscal incentives could be one, but I don’t believe it is the top. The top of the mind of the investor is peace and order, second is stability of policies, third infrastructure, and fourth, enjoyment,” Lambino said.

PEZA, the country’s lead IPA, however, has a different view on the matter.

PEZA director general Charito Plaza said while investors “ideally” look initially at factors like a country’s supply chain, infrastructure, and manpower, that is not the case for the Philippines.

“In our case, of all the factors, we are behind in everything. We lack the IT infrastructure, the physical infrastructure, as well as facilities and logistics services. Investors are here now because of our incentives, that is why we need to maintain it. Let us not remove these incentives because they are here for that,” Plaza said.

Meanwhile, Clark Development Corp. (CDC), also one of the leading IPAs, earlier told The STAR that it is not worried about the looming reforms in the country’s incentives package, expressing its full support to the government’s plan to make the Philippines a more competitive investment destination.

“The incentives are not being taken away. They are being rationalized,” CDC president Noel Manankil said.

“Let us be assured that whatever comes up, the government will make sure that we remain competitive as a country, as an investment destination. The government is conscious that competition is not local, it’s international,” he added.

The Department of Finance intends to cover both rationalization of fiscal incentives and reduction of corporate income tax rates under the second tax reform package.

The Department of Trade and Industry (DTI), the parent agency of the Board of Investments, another IPA, is also in support of the proposed rationalization of incentives, clarifying that the proposed legislation is not meant to remove the perks, but instead recognizes its important role and the need to make them more responsive, relevant and effective.

The DTI said the second tax reform package would even provide better incentives by conforming to the principles of being performance-based, time-bound, focused and transparent.