TRAIN 2 worries investors – PEZA

Apprehensive of the impact on the planned government incentives rationalization being crafted under Package 2 of the TRAIN, the Philippine Economic Zone Authority (PEZA) said the government “should not kill the goose that lays the golden egg” and urged the government to look beyond the foregone tax revenues granted to the export-oriented enterprises as against their overall contribution to the country’s welfare.

PEZA Director-General Charito B. Plaza showed data to quantify the overall contribution of their registered enterprises to the domestic economy as the Department of Finance is moving to the second package of the phased TRAIN, which seeks to reduce incentives to investors by removing or capping the 5 percent gross income earned (GIE), which PEZA investors enjoy perpetually after exhausting the income tax incentives that could run from a minimum of 4 years to a maximum of 8 years.

“Let us not just be conscious of cash collected by the government but look at the total development and contribution brought by investors and industries,” Plaza said.

While she was confident that Finance Secretary Carlos Dominguez III will make good of his promise that indeed PEZA enterprises are exempted from the Presidential veto on the removal of the 12 percent VAT under TRAIN 1, she was worried about Package 2 of the TRAIN.

According to Plaza, the finance department will formally release the exemption of PEZA companies from the 12 percent VAT payment on their local purchases.

“For TRAIN 1 we are thankful, but TRAIN 2 it is still sending worries to investors of what might be the final law,” she said.

For the past 22 years (1995-2017), PEZA data showed that this self-revenue generating government agency registered P3.614 trillion in total investments which directly employ 1,417,832 workers, and created 1,089,160 indirect jobs for a total of 21,267,480 Filipinos affected by PEZA’s programs.

PEZA’s total registered enterprises exported $706.285 billion from 1995-2017. They also sourced R295.930 billion of materials and inputs, which are VAT free, from domestic suppliers in 2017 alone or an increase from R253.13 billion in 2016.

All these have resulted in PEZA’s total cumulative income of R105.238 billion as against total expenses of R89.378 billion and net income of R15.861 billion as of 2017.

With this income, the selfsufficient PEZA with no single centavo appropriation from the national government was able to remit to the government a total of R18.88 billion in the form of dividends, corporate income taxes and loan payments. In 2017 alone, PEZA remitted R1.099 billion to the government.

PEZA enterprises also accelerated importation to $39.182 billion in 2017, which consists of equipment and materials needed for their manufacturing operations in the country, from $30.899 billion worth of importation in 2016.

PEZA generates administrative fees of R45,000 per locator annually, registration fees, import export fees and rentals as their source of revenues.