THE Philippine Economic Zone Authority (PEZA) said it wants to retain the “status quo” on incentives for export-oriented companies, posing another potential delay to the bill reducing corporate income tax and rationalizing incentives.
PEZA Director-General Charito B. Plaza said in a statement Monday that its board intends to propose amendments to the legislation in order to retain current investors and attract new business.
“Our appeal is an institutional decision to oppose specific provisions of the CITIRA/CREATE (bill) because of its adverse effects on PEZA-registered enterprises and the Philippine economy in general,” she said.
Representative Jose Ma. Clemente S. Salceda of Albay’s second district said PEZA is effectively delaying tax reform and backed the passage of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), which accelerates reductions in corporate income tax (CIT) to 25% from 30% by July.
Ms. Plaza said in a mobile message that PEZA proposes that CREATE be applied to domestic enterprises, saying that export companies and economic zone developers under PEZA and other investment promotion agencies should retain their current incentives.
“CREATE will be for domestic enterprises/MSMES (micro, small, and medium-sized enterprises) as they’ll benefit from a reduced CIT and first-time incentives from government so, their production, manufacturing , export capability will be maximized and completing the supply chain utilization and development of our idle lands will be realized to make our country self reliant, self-sustaining and resource-generating,” she said.
PEZA in the statement said that business groups like the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), Information Technology and Business Process Association of the Philippines, Confederation of Wearable Exporters of the Philippines, Philippine Ecozones Association, and the Joint Foreign Chambers support the status quo on incentives.
These groups had earlier written to Senator Pilar Juliana S. Cayetano, who chairs the committee on ways and means, to express their support for the reduction of corporate income tax by July.
But the groups also asked that companies that continue to meet conditions like exporting 90% of output and employing at least 10,000 people be eligible to keep the 5% tax on gross income earned (GIE) in lieu of national and local taxes.
“SEIPI agrees with PEZA’s position to retain investors’ incentives as long as they are meeting performance criteria,” SEIPI President Danilo C. Lachica said in a mobile message.
Economists from various universities have proposed amendments to CREATE, saying that it constitutes tax relief for corporations but leaves out small businesses. They also said that export zones will suffer after the 5% GIE expires.
“PEZA enterprises and foreign investors do not welcome this change from rules to discretion, which is fraught with risk and uncertainty. And we simply cannot afford to add more uncertainty during this fragile recovery period from the COVID-19 pandemic.”
The economists, which include Ateneo School of Government Dean Ronald U. Mendoza and De La Salle University School of Economics Dean Marites M. Tiongco, proposed that CREATE be unbundled into three separate bills addressing corporate tax reform, fiscal and investment incentives, and PEZA. They added that PEZA must maintain its incentives pending a consolidated incentive act. — Jenina P. Ibañez
