Non-extension of TEZ incentives may adversely impact tourism competitiveness

MANILA, Philippines — The possibility of not extending the grant of incentives given to Tourism Enterprise Zones (TEZ) is seen to put a dent in the competitiveness of the country’s tourism sector.

“For us, it’s similar from what we see in the office (sector) from the PEZA (Philippine Economic Zone Authority) locators. That will definitely have a dent in the flow of tourism investments here,” Colliers International Philippines research manager Joey Roi Bondoc told The Star.

Finance Secretary Carlos Dominguez earlier said the Department of Finance (DOF) is not keen on extending the sunset period for the grant of incentives for TEZ, which will lapse next year.

Bondoc said the DOF should carefully evaluate their decision and as it would have an impact on the flow of investments.

“Again, I mentioned that’s part of the tourism competitiveness that we plan to aspire for,” he said.

Based on the 2017 Travel and Tourism Competitiveness report by the World Economic Forum (WEF), the Philippines slipped to the 79th rank, five spots lower than its ranking in 2015.

The report said there are several categories where the Philippines needs to improve substantially, such as in safety and security category, where the country ranks 126th.

Dominguez earlier said the DOF would oppose any proposal to extend the sunset provision under Republic Act 9593 or the Tourism Act of 2009, which provides incentives to tourism zones identified by the Tourism Infrastructure and Enterprise Zone Authority (TIEZA).

This is despite the six-year delay in the implementation of the law.

“That law was passed in (2009), but was never implemented by the last administration. One of the first things I did was implement it. And we will have to run its course,” Dominguez was earlier quoted saying.

Dominguez said the current administration of the DOF should not be blamed for the failure in the implementation of the law.

“The law is the law. It’s not my fault that it was not implemented. We actually are the ones who implemented it in 2016,” he said.

Department of Tourism (DOT) Secretary Bernadette Romulo-Puyat  told The Star that they are still discussing the issue with Dominguez.

“He’s very supportive of tourism. There’s no problem,” Puyat said.

Last year, the Bureau of Internal Revenue(BIR) clarified that the incentives for TEZ under Republic Act 9593 may be enjoyed by investors even beyond 2019 until these incentives are fully realized.

Under RA  9593, TEZ developers and tourism enterprises will be granted a six-year income tax holiday that may be extended for another six years, a five percent preferential tax on gross income in lieu of national taxes except for real property tax and fees of TIEZA, a  net operating loss carry over scheme, import tax exemptions for capital goods and equipment needed for TIEZA-registered activities, and import tax exemptions for transport equipment and spare parts needed for TIEZA-registered activities.

They will also be exempted from value-added tax and excise tax goods imported by TIEZA-registered activities, tax credit equivalent to taxes paid on locally sourced goods, and tax deduction of up to 50 percent of cost of environmental protection and cultural heritage preservation activities as well as of sustainable livelihood programs of the registered tourism enterprises.

Bondoc earlier said an improvement in the tourism sector’s competitiveness is needed to be able to attract more hotel and tourism-related investments.

“Generally the country’s travel and tourism competitiveness should improve. If this happens we attract more foreign tourists, including the high spenders,” he said.

He said there are three major areas where the country should improve to attract more leisure investments,  and these include safety and security, infrastructure, and ease of doing business.