THE Philippine Economic Zone Authority (PEZA) said investment pledges in the first nine months of 2018 declined over 55% with potential investors taking a wait-and-see attitude pending the passage of the Tax Reform for Attracting Better and High Quality Opportunities or TRABAHO bill.
Investment pledges totaled P87.85 billion in the first nine months, well below the year-earlier P196.46 billion.
The number of proposed projects registered for incentives fell nearly 18% to 362.
“Existing investors are not expanding. New investment pledges are not coming because everybody is waiting for what will be the result of the TRAIN (Tax Reform for Acceleration and Inclusion) 2,” PEZA Director-General Charito B. Plaza said in a phone interview on Thursday.
The TRABAHO bill is the second tranche of the tax reform program, initially called TRAIN.
“Manufacturing, etc., dropped,” Mr. Plaza added.
Meanwhile, the information technology sector, consisting mostly of business process outsourcing (BPO) firms and contact centers, accounted for the bulk of investments generated during the period, rising 8.82% year-on-year to P12.39 billion.
PEZA had not provided a breakdown of investment pledges by sector or by quarter at deadline time.
Exports by PEZA-registered enterprises, covering the eight months to August, rose 6.43% year-on-year to $35.79 billion.
Workers directly employed by PEZA-registered firms in the first eight months were estimated at 1.46 million, up 6.79%.
Information Technology and Business Process Association of the Philippines (ITBPAP) President and CEO Rey E. Untal said the wait-and-see attitude towards the TRABAHO bill, which seeks to rationalize investment incentives, has been dampening new activity in the sector, and forcing a rethink of expansion plans.
“A number of companies had a wait-and-see attitude [starting] last year, and I would like to think until now… the uncertainty had created that reaction,” Mr. Untal said Thursday in an interview at the group’s headquarters in Taguig City.
PEZA currently grants incentives including income tax holidays of up to eight years, and a perpetual 5% tax on gross income earned, and a zero value-added tax on local purchases, among others.
The TRABAHO bill is targeting revenue leakage via the grant of incentives deemed unwarranted and proposes to make incentives time-bound and performance-based.
The TRABAHO Bill will gradually reduce the corporate income tax (CIT) rate to 20% from the current 30% over a 10-year period. — Janina C. Lim
