PEZA: Higher investments likely with CITIRA passage

MANILA, Philippines — The Philippine Economic Zone Authority (PEZA) expects increased investments in the country’s economic zones this year once an attractive Comprehensive Income Tax and Incentives Rationalization Act (CITIRA) is passed.

“We’re targeting for higher investments this year,” PEZA director general Charito Plaza said in a text message, noting the goal is anchored on the passage of a version of the CITIRA which would be acceptable to existing investors and encourage new firms to enter the country.

Investments registered with PEZA as of end-November last year declined 13 percent to P109.19 billion from P122.98 billion in the same period in 2018.

Plaza said uncertainties on the CITIRA bill have affected investments, with firms putting on hold plans to start new or expand existing operations.

Under the CITIRA bill approved on third and final reading at the House of Representatives, the government would gradually bring down the corporate income tax rate to 20 percent from 30 percent over a 10-year period while incentives given to investors are rationalized.

Part of the changes in the incentives system is to remove the five percent tax on gross income earned (GIE) paid by PEZA-registered firms.

The five percent GIE is paid in lieu of all taxes after PEZA-registered firms have used up their income tax holidays.

In making an investment, Plaza said investors consider various factors including power and utilities cost, manpower, wage, supply chain and infrastructure.

“Fiscal and non-fiscal incentives and subsidies are the most attractive in the absence of the above factors,” she said.

As the Philippines is lacking in the efficiency factors investors are looking for and is competing with other Southeast Asian countries, she said it is important to provide incentives that would encourage firms to locate or expand in the country.

Earlier, Trade Secretary Ramon Lopez said he is hopeful the CITIRA bill would be approved in the first quarter this year to put an end to investor uncertainty.

As some investors are holding off plans to invest as they wait for the final version of the CITIRA, he said the BOI has recommended that there be a provision which would allow new investors to choose whether to be part of the current incentives regime or the new system.

Lopez said he hopes the recommended provision would be included in the CITIRA bill to be filed by Sen. Pia Cayetano, and that such version would address the concerns of investors.