PEZA appeals anew to Duterte regarding fiscal incentives

MANILA, Philippines — The Philippine Economic Zone Authority (PEZA) is appealing to President Duterte to exclude the investment promotions agency (IPA) from the rationalization of fiscal incentives under the Corporate Income Tax and Incentive Rationalization Act (CITIRA) bill, saying that the proposed changes to tax perks would make the country less attractive to investors.

PEZA director general Charito Plaza is calling on Duterte to exempt PEZA from the coverage of the CITIRA bill, which when passed, would cut the country’s corporate income tax (CIT) rate to 20 percent from the current 30 percent, and revamp incentives by removing the five percent on gross income earned (GIE) paid in lieu of taxes by firms operating in economic zones.

The CITIRA bill has been identified by Duterte in his State of the Nation Address in July as a priority measure which needs to be passed by the 18th Congress.

“Instead of trying to change (PEZA) incentives and causing instability, Philippines should seize opportunity to take advantage of the US-China trade war, the Hong Kong turmoil and GSP (Generalized Scheme of Preferences) Plus zero tariff privilege, which are opportunities for us to attract new and transferring investments toward our country,” she said.

PEZA cited a recent research by the World Bank which showed that companies are relocating  their operations due to the trade tensions. Investors are moving to other Southeast Asian countries such as Vietnam, Malaysia, Thailand and Cambodia, but not to the Philippines.

“We are not the only game in town. Philippine economic zones are competing with other countries or with far more developed and high-tech ecozones. Congress should be careful about ‘follow CITIRA or leave Philippines’ attitude as investments are crucial for employment, exports, and economic growth,” she said.

“If government insists on CITIRA, we might not have anything left,” Plaza said, stressing that investors are already preparing exit plans in case the bill is passed in its current form.

Joint Foreign Chambers of the Philippines, as well as industry associations Semiconductor and Electronic Industries in the Philippines Foundation Inc. (SEIPI), Information Technology and Business Process Association of the Philippines, Philippine Ecozones Association, and Confederation of Garment Exporters of the Philippines back PEZA’s exemption from the CITIRA bill to allow the country to keep and attract investments push for jobs creation.

“Major revamp of incentives under CITIRA is dangerous legally and economically. Export-oriented companies are in contract with PEZA when they registered in our economic zones and aimed to enjoy Philippine fiscal incentives. Tax revamp hindered exporters that supposedly were aiming to expand nationwide,” Plaza said.

Apart from the exclusion of PEZA in the CITIRA bill, amendments to the PEZA’s charter are also being pushed, even without the backing of the Department of Trade and Industry (DTI) which chairs the IPA.

Asked if PEZA would no longer pursue the proposed amendments to its charter if the government would agree to exclude the IPA from the CITIRA bill, Plaza said the agency is not inclined to that kind of compromise and is firm on its stand to push for exemption from CITIRA.

“We are not willing to compromise because it’s a dangerous compromise and we cannot, and we should not tinker with our incentives which make us globally competitive. Otherwise, we lost the competition,” she said.