PEZA seeks stronger mandate to grant tax perks, subsidies

The Philippine Economic Zone Authority (PEZA), which grants incentives to export-oriented enterprises, is seeking amendments to its 23-year-old charter to empower them to grant enhanced incentives and subsidies to mega investments in basic industries and to convert itself as a full-fledged government owned and controlled corporation under the Office of the President.

PEZA Director General Charito B. Plaza, who unveiled this plan to media Monday, expects to submit their proposal to Congress before or after the President’s third SONA.

The PEZA’s set of bold amendments to its charter serves as a countermeasure to the ongoing plan of the Department of Finance to reduce, in the guise of harmonizing, tax incentives granted to export-oriented enterprises and to remove its power to grant incentives to their registered enterprises.

“We are proposing these amendments to the PEZA law because it is now 23 years old. There are so many weaknesses,” she said.

On incentives, Plaza said they are seeking to enhance their tax offering by allowing them to grant subsidies to investors in basis industries such as steel and basic crop production that will locate in war-torn areas like Marawi and disaster prone areas. These incentives could include lower power rate, free land lease or minimal lease amount for a certain period, among others.

The grant of subsidy to mega investors in a basic industry will still be approved by the President.

“These are some forms of big subsidies that can attract basic, major and strategic industries in the world. These are being done in China and Vietnam that’s why they get the big investors, they provide subsidy,” she pointed out.

In addition, PEZA enterprises will be allowed to sell more to the domestic market. At present, these specific companies are allowed only to sell 30 percent of production to the local market without tax.

“We will also propose to increase the domestic sale allowance of industries that will produce the basic crops and the basic industries so that we can minimize if not totally stop importation, and increase our production and manu- facturing capability, this will be a big big boost to our economy,” said Plaza.

PEZA would also like to bolt out from the claws of the Department of Trade and Industry and into under the wings of the OP as a full-fledged GOCC. This, Plaza said, would give them a distinct personality from the current status as an agency attacked to DTI.

It also seeks to institutionalize the IT industry as among the registrable industries under PEZA Law since this was not specifically included in the old charter. Instead of the incentive granting power be relegated to the proposed Fiscal Incentives Regulatory Board (FIRB) to be chaired by the DOF Secretary under the proposed second tax reform package, PEZA would like that the PEZA Board be bestowed with this authority instead.

Plaza explained that all the economic agencies of the government are represented in the PEZA Board, which is chaired by the DTI Secretary.

“It’s actually a redundant for us because the DOF, DTI, Department of Energy, National Economic and Development Authority, Department of Agriculture, almost all agencies which has participation in PEZA’s registrable industry are already members of the board. So they are part of those who approved the policies, programs, applications. These respective departments are already aware of what's happening in PEZA and how it is performing,” she stressed.

By becoming a fullfledged GOCC, PEZA will be fully independent. It will not rely on other laws to justify the grant of incentives. At present, some of the PEZA incentives are taken out from the Omnibus Investments Code of the Board of Investments. The perpetual 5 percent gross income earned incentive though is special only to PEZA.

“There is no need for another body. It will be an attraction to investors in the Philippines because there really is ease of doing business because the more interference from different bodies and agencies the more that investors will be discouraged to come in,” shaded.

“In the proposed new law, we will already specifically provide the incentives so that there will be stability, it cannot be changed.”