Pasay City – Amid the ongoing deliberations in the Senate, the Philippine Economic Zone Authority and its industry associations that employ thousands of Filipinos in ecozones together remained firm in the call to exempt from the Corporate Recovery and Tax Incentives for Enterprises (CREATE) the tax incentives administered by the agency.
Saying that tax incentives of PEZA are renowned internationally to attract investors, PEZA appeals for separate tax regime for export-oriented companies and domestic enterprises.
“While PEZA see as valid the rationalization of the corporate tax incentives, the current situation of global economy in 2020 and the coming years is not the appropriate time to change the current incentives’ regime,” said PEZA Director General Charito “Ching” Plaza.
PEZA’s incentives and its best practices in one-stop shop and in providing the ease of doing business have attracted various exporters to the country. Our brand of service has effectively increased PEZA’s ecozones to 408 with 4,587 registered business enterprises creating 1.6 million jobs as of December 2019, despite problems in the country’s efficiency factors and non-fiscal incentives such as in infrastructure, logistics, and power rates.
Positive impressions on PEZA
The agency underlines the positive impressions from foreign entities about PEZA’s performance and its globally-competitive, tried and tested tax incentives. Thus, the PEZA Chief reiterated that there’s no compelling reason to change PEZA’s tax incentives which in fact had been vindicated by NEDA’s cost and benefit analysis’ initial findings.
NEDA’s preliminary findings, which was presented during the October 02 Board meeting, cited positive contributions to Philippine economy of tax incentives as tool for attracting much-needed foreign investments.
PEZA’s best practices have also been recognized over the years by various organizations like the IFC World Bank and recently this 2020 by the US Department of State in its 2020 Investment Climate Statements about the Philippines.
The US Department of State said that “The business environment is notably better within the special economic zones, particularly those available for export businesses operated by the Philippine Economic Zone Authority (PEZA), known for its regulatory transparency, no red-tape policy, and one-stop shop services for investors.”
“What the Philippine government must focus on is reducing the cost of doing business and increase the international competitiveness of the Philippines in export-oriented industries,” suggested Plaza.
CREATE for Domestic Enterprises
Underlying PEZA’s clamor also for the retention of its tax incentives is anchored on the mandate to generate investments, jobs, and export-incomes for the Filipino people. The export market in the international scene is a huge and competitive arena where exporters around the world compete.
“The Philippines is not only the game in town. We compete even with our immediate ASEAN neighbors who adjust their incentives amidst the pandemic in order to retain or attract new investors,” said Plaza.
“However, we must distinguish between foreign and local market and enterprises. Domestic enterprises, unlike exporters, may not necessarily leave and bring out their capital from the country if they close down. On the other hand, exporters closing and leaving Philippines have big impact on our people’s jobs and revenue generations,” said Plaza.
Instead, PEZA believes that the CREATE bill should best be applied to domestic enterprises, not export-oriented companies.
“It is high time for the domestic enterprises to benefit from the reduction of the corporate income tax and enjoy for the first time incentives in rationalized manner,” explained Plaza.
She added, “This will in turn maximize the micro, small, and medium enterprises (MSMEs) production, manufacturing export capabilities, complete supply chain, and encourage exporters to minimize import dependence.”
“We have to empower, capacitate, and enrich economically first the LGUs, our farmers, MSMEs, and our people in general to contribute in enhancing our idle land assets and available rich natural resources,” Plaza said.
COVID-19 pandemic hits PH economy
In recent report by the World Bank, it cited that the Philippine economy will experience deeper negative effects this year as the COVID-19 crisis continues to be uncontained in the country and thereby increase poverty.
Plaza added, “Let us keep in mind the onslaught of the COVID-19 pandemic and the recent climate disasters to our economy. We cannot afford to also lose the confidence of our exporters.”
“Tax incentives really matter and the best proof of that is the industry,” noted Philippine Association of Multinational Companies Regional Headquarters Inc. (PAMURI) member Mimi Malvar.
She added, “We appeal to Congress and [Department of Finance] to consider competitiveness especially at this time of pandemic that many countries are scrambling for the investments to flow into their countries.”
Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI) President Dan Lachica said “We would rather have the incentives retained for those investors meeting the performance criteria, putting a transition period puts additional investments at risks especially if operating costs are not competitive with Vietnam, Thailand and Malaysia.”
The PEZA Chief underlined, “In the midst of continuous natural and man-made disasters going on in the country and in the world, we appeal for crucial consideration and for the wise judgment of our lawmakers to pass an investor-friendly CREATE law, to put order and stability in our investment and economic policies, laws and program.
The CREATE Bill remains one of the priority bills of the government this 2020. The Senate deliberations will continue before the break on December. #