Japan businesses wary of tax reform impact on PEZA perks

JAPANESE businesses are “watching carefully” how Philippine tax reform plays out, and focusing on those provisions that seek to remove incentives being enjoyed by locators at Philippine economic zones.

This is the message sent by Japan’s small and medium enterprises ( SMEs) that are keen to forge partnerships with local businesses, said Hiroshi Shirashi, president of the Japanese Chamber of Commerce and Industry of the Philippines.

“We support TRAIN (the Tax Reform for Acceleration and Inclusion Act), but we also wish to maintain PEZA (Philippine Economic Zone Authority) incentives. It’s very important,” he told reporters on the sidelines of the Philippine Business Conference and Expo at the Manila Hotel on Thursday.

Mr. Shirashi said he understands that the country’s tax reform will consist of several packages, and that his business chamber would be looking out carefully for the final outcome and its possible impact on the incentives being extended by PEZA, including an income tax holiday and the treatment of corporate tax.

The PEZA incentives are proposed for removal by the tax reform version approved by the House of Representatives although these were retained by the bill’s version at the Senate, he said.

“In the Senate version, these incentives [are] maintained,” said Mr. Shirashi. “We watch carefully what’s going on.”

PEZA, an agency attached to the Department of Trade and Industry, is tasked to promote investments, extend help, register, grant incentives to and facilitate the business operations of investors in export-oriented manufacturing and service facilities.

These businesses are locators in selected areas throughout the country proclaimed by the President of the Philippines as PEZA Special Economic Zones.

Mr. Shirashi also said he expects more Japanese SMEs to be interested in doing business in the Philippines but they need local partners.

Unlike global Japanese enterprises, many of which already have a base in the country, the SMEs are domestic companies that need assistance from local partners. He said the small and medium companies are in food processing, retail, real estate, financing and logistics.