PEZA wants CITIRA exemption for ecozone firms

As the proposed second package of the government’s tax reform program hurdled the committee level at the House of Representatives, the Philippine Economic Zone Authority (PEZA) has urged Congress to reconsider the scope of the bill seeking to rationalize fiscal incentives by excluding ecozone locators, saying tax perks given by government to firms have yielded economic benefits.

PEZA director general Charito Plaza said the investment promotion agency wants Congress to exclude companies operating in economic zones from the coverage of House Bill 313 or the Comprehensive Income Tax and Incentive Rationalization Act (CITIRA) bill.

The CITIRA bill, which was approved by the ways and means committee of the House of Representatives on Wednesday, aims to gradually cut the country’s corporate income tax rate – considered among the highest in the region – to 20 percent from 30 percent, as well as rationalize fiscal incentives given to firms.

Part of the proposed changes in the incentives regime is the removal of the five percent tax on gross income earned paid by PEZA-locators after their income tax holidays expire.

CITIRA, previously known as Tax Reform for Attracting Better and High Quality Opportunities or TRABAHO bill, was approved on third and final reading during the previous Congress.

While the Department of Finance earlier said government’s foregone revenues from the grant of tax perks were estimated at P1.12 trillion from 2015 to 2017, Plaza refuted the claim and said the country has been gaining from tax incentives given to investors.

In particular, she said PEZA-registered companies have brought in P10.05 trillion to the economy through investments, exports, salaries and wages, taxes paid, local purchases of capital equipment and raw materials, as well as the agency’s taxes and dividends to the national government during the same period.

Based on PEZA’s study, every P1 incentive given by government translates to P11.43 given back by PEZA companies to the economy through

the taxes paid to both the national and local government units.

“PEZA’s incentives are tried, tested and proven to attract investors and in fact proven by PEZA’s performance and they are being copied by other countries,” Plaza said.

As CITIRA bill would introduce changes in incentives enjoyed by firms, she said PEZA locators and prospective investors are getting worried and are putting their investment plans on hold.

Due to uncertainties and concerns of both existing and prospective locators on the planned rationalization of incentives, investments registered with PEZA went down 25 percent to P29.49 billion as of end-April from P39.09 billion in the same period last year.

Plaza said PEZA wants incentives of firms to be kept as is, if not improved.

“PEZA’s incentives should not be reduced, but enhanced as these are among the key factors important for investors,” she said.