THE Philippine Economic Zone Authority (PEZA) said it will commission an independent study to establish which of its fiscal incentives the are effective in driving economic growth, to establish the case for retaining the perks when the legislation comes before Congress.
“We will be hiring either SGV or PriceWaterhouseCoopers because we want to have a performance audit of PEZA from the time it was created in 1995 to 2018 so we will really know the efficiency of PEZA and the contribution of every incentive. Kasi baka may mga areas na tama naman see DoF (There may be some parts of the Department of Finance’s critique of the incentive refine are correct). I want to see it myself,” PEZA Director-General Charito B. Plaza said in a briefing last week in Taguig City.
The DoF is proposing tax reforms that rationalize the system of fiscal incentives, including the 5% rate on gross income earned (GIE) and income tax holidays, which the department claims cost the government billions in foregone revenue.
PEZA estimates of the benefits derived from incentives diverge from the DoF’s.
Ms. Plaza added it is the National Economic Development Authority’s (NEDA) duty to conduct a cost-benefit analysis under Republic Act 10708 or the Tax Incentives Management and Transparency Act (TIMTA) of 2015.
“If only NEDA had done the cost-benefit analysis as required by the TIMTA law… Wala daw specialist pa si NEDA (NEDA says it lacks specialists) to interpret and do the cost-benefit analysis. Kaya nga DoF (which is why DoF) bases its position on its own computations and we have our own,” Ms. Plaza added.
Under the TIMTA law, NEDA is required to conduct the analysis annually based on the aggregate tax incentives report compiled annually from data provided by investment promotion agencies.
The independent study PEZA is planning to commission will also include an analysis of social benefits of fiscal incentives, according to Ms. Plaza.
“Growth in the Calabarzon area, for example, where the LGUs (local government units) are earning a lot because they have a share of the 2% GIE and real property taxes while their constituents are given jobs, (exemplifies) the multiplier effect” of such investments, Ms. Plaza said.
She added the Calabarzon region has the “highest social progress that cannot be quantified, that can’t be seen but can be felt.”
Ms. Plaza added she hopes the review will be completed within the year and help PEZA make the argument for retaining incentives when the bills go before the 18th Congress.
The reform bills also aim to reduce corporate income tax to 20% by 2029 from 30% currently while overhauling the current system of fiscal perks. — Janina C. Lim