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PEZA Chief breaks myths: Fact is PEZA’s tax incentives are performance- and target-based for products and services, technology, and capital investments not for companies

PEZA Chief breaks myths: Fact is PEZA’s tax incentives are performance- and target-based for products and services, technology, and capital investments not for companies
October 2, 2020
PEZA Chief breaks myths: Fact is PEZA’s tax incentives are performance- and target-based for products and services, technology, and capital investments not for companies

02 October 2020 (Friday)

Pasay City – Amidst the ongoing deliberations in the Senate about the Corporate Recovery and Tax Incentives for Enterprises Act or the CREATE bill, Philippine Economic Zone Authority (PEZA) Director General Charito “Ching” Plaza has once again debunked misconception against PEZA’s tax incentives for registered business enterprises (RBEs), saying PEZA’s incentives are in fact performance- and target-based and it is not forever given to companies but to technology, product quality services, expansion, and increase in the capital investments by investors.

According to CREATE proponents, Philippines is the only country offering ‘forever’ incentives with its 5% gross income earned (GIE) tax regime. The overall goal of CREATE is to rationalize fiscal incentives towards being performance-based, target-based, time bound, and transparent which Plaza said have long been implemented by PEZA.

“Contrary to notion that PEZA’s incentives lacked those standards, PEZA’s incentives are given to qualified products/activities on a per project basis. It is product, activity, and performance-based from the beginning, not an afterthought. Incentives are being given to motivate and encourage companies to bring in new technology, upgrade, grow, and perform in a global market competition for exports,” explained the Director General.

Performance and target-based

The PEZA Chief underlined that “PEZA incentives are not given to companies, enterprises, locators, or ecozone developers per se, but incentives for export-based industries are for those who are able to upgrade their products, activities, expand their projects and markets, and those who can bring technology-transfer in the Philippines.”

“PEZA has validation process in order for locators and companies to avail of tax incentives,” explained Plaza.

Only activities included in the Investment Priorities Plan (IPP) may be registered with PEZA and granted incentives. In addition, RBEs shall only operate exclusively inside PEZA-registered economic zones and engage only in registered/authorized activities which require prior approval of the PEZA Board.

Plaza noted that “If the activity is not registrable with PEZA, we deny outright their application and it never reaches the PEZA Board. Only applications that satisfy all the qualifications are evaluated by PEZA and presented to the PEZA Board for approval.”

PEZA monitors performance

Further, under the Implementing Rules and Regulations of Republic Act No. 7916 or “The Special Economic Zone Act of 1995,” PEZA may suspend, withhold, disapprove or revoke import or export permits, authority to engage in local sale, to avail of any incentive or privilege being administered by the agency for failure of companies to comply with the rules and regulations governing the incentives.

“In other words, incentives are not forever enjoyed by companies which fail to innovate and expand, thus, they lose the world buyers and close shop. It is a misimpression that incentives are continuously given even to non-performing companies,” said the Director General.

PEZA also requires registered enterprises to submit reportorial requirements on a regular basis and failure to submit these reports shall result in the payment of fine, withholding of necessary permits such as building and occupancy permits, permit to operate and/or Letters of Authority (LOA) including the suspension of the enjoyment of incentives. The submission of these reports are for monitoring of their activities and compliance with the conditions imposed in their registration.

Retain PEZA’s incentives

Finally, Plaza reiterated that “PEZA’s position—supported by our ecozone operators, export companies, industry associations and foreign chambers—is for the retention and enhancement of the incentives package which are tried, tested and globally-competitive especially in this time of pandemic. The retention of the tax incentives will keep our 4,587 export companies and 408 economic zones (both vertical and horizontal ecozones) and the 1.6 million directly employed Filipinos in various ecozones.”

According to Plaza, “Changing the rules and system will discourage the export companies who are trying their best to keep their investments and jobs in the Philippines so everybody can survive amidst the pandemic.”

“Let us be sensitive to our people’s needs for jobs and livelihood and support our investors’ struggles to keep their businesses going as well as the jobs they are investing in the Philippines,” stated the Director General.

PEZA Balancing Acts

Plaza proudly noted that PEZA has maintained its RBEs operations even during this time through its ‘balancing acts.’ “PEZA has implemented an effective ‘balancing acts’ to address both the dangers and opportunities brought by the COVID-19 crisis. Now, 80%-90% of its 4,587 locator companies in its 408 ecozones continue to operate with implementation of strict health and safety protocols, ensuring the welfare of more than one million employees still working.”

The PEZA Chief added, “PEZA doesn’t stop focusing on incentives as the country’s edge for investments but works with various stakeholders, agencies, and partners in order to address the efficiency factors such as logistic hubs, support services, supply chain, backward and forward linkages through PEZA’s 10 point programs and DOLLAR program. PEZA’s programs are anchored towards thinking globally and acting locally.”

“Together with our industries, we strongly appeal and pray for wisdom be granted to our Honorable Senators and Congressmen on the final version of the CREATE Law, which will be beneficial for everyone,” said Plaza.

The Senate debates on the pending legislation will continue on Monday, October 5.