THE Philippine Economic Zone Authority (PEZA) said it will submit to the next Congress its proposed amendments to the current incentive regime, distinguishing more clearly between firms serving a mainly domestic market and exporters.

Speaking to BusinessWorld in Taguig City last week, PEZA Director General Charito B. Plaza said the agency now has a draft proposal to amend Republic Act 7916 or the Special Economic Zone Act of 1995.

Ms. Plaza said she cannot at the moment disclose other provisions of the draft.

However, in July 2018, Ms. Plaza discussed the possibility of turning PEZA into a government-owned and controlled corporation, and be transferred under the Office of the President from the Department of Trade and Industry (DTI).

She also wanted the PEZA board to have the authority to recommend to the President subsidies to be granted to economic zone locators, especially those who propose to invest at least $1 billion.

“We hope to have it filed in the next Congress. [The draft intends to amend] the PEZA law [particularly in terms of] separating the incentives package for exporters and domestic firms,” Ms. Plaza said.

A separate package will address the needs of various types of business to account for changes in the treatment of exporters in the next round of tax reforms contained in the so-called TRABAHO bill, Ms. Plaza said.

“Our incentives have to compete. Other countries have separate incentives for domestic-market firms and exporters and they are competing,” she added.

She first floated such proposals as a compromise to the changes in store under House Bill 8083, known as the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) bill.

The measure intends to cut the corporate income tax (CIT) to 20% from 30% by 2029, on a staggered basis.

The Senate version proposes slashing the CIT to 25% in the first year of implementation.

However, both intend to remove certain fiscal incentives that the Department of Finance has blamed for lowering its tax collections, particularly the 5% gross income earned incentive.

The House passed the TRABAHO bill on third reading in September 2018. The measure now awaits further action from the Senate which may convene in late May to pass its own version.

PEZA and other ecozone locators have warned that the TRABAHO bill’s passage will result in massive lay-offs as several investors threatened to pull out if the bill is enacted.

Last year, PEZA-registered investment pledges fell 41% to P140.24 billion amid uncertainties stemming from the TRABAHO bill and the upcoming Senate elections.

In the first two months of the year, PEZA investment pledges fell 16.52% to P17.522 billion, with Ms. Plaza attributing this to a wait-and-see attitude ahead of the elections. — Janina C. Lim