The chairman of the House Committee on Ways and Means on Sunday rejected the appeal of the Philippine Economic Zone Authority (Peza) to exclude its locators from the coverage of the proposed Corporate Income Tax and Incentives Rationalization Act (Citira), saying the lower chamber’s proposal is the “best” in Southeast Asia.

Albay Rep. Joey Salceda, the panel chairman, said the House Bill 313 or the Citira is “nonnegotiable.”

“Only in the Philippines [do] forever incentives exist. That has to go, it’s nonnegotiable. No forever,” he said.

“Incentives should be targeted on sectors we need and should be performance-based—50 percent more deductions for labor, 50 percent more for domestic inputs, 100 percent more for RD [research and development], 100 percent more for training, 100 percent more for infrastructure—new incentives are linked to targets prior to approval, not some afterthought of bloated claims,” he said.

According to Salceda, the incentives provided under the Citira are the best compared to the Philippines’s neighbors.

“Our new offer is the best in region. Vietnam offers only four to two years of ITH and additional two years based on performance,” he added.

During the committee deliberations of HB 313, Peza Director General Charito B. Plaza asked lawmakers to exempt Peza from the coverage of Citira.

Plaza said the Finance department should not only be concerned with how to increase taxes and income of the national government but must also consider the income created for the local government units.

According to Plaza, a total of P10.05 trillion was poured in by Peza and its registered companies into the Philippine economy from 2015 to 2017.

Plaza said she will appeal to the Senate because they act more like “statesmen” compared to members of the lower chamber.  Last week, the way and means committee approved the Citira, with an eye to having the country secure an A credit rating by 2022 by S&P Global Ratings.

The bill or the second package of the comprehensive tax reform program (CTRP) also aims to ensure that the grant of fiscal incentives helps bring in the greatest benefits, such as higher and more dispersed investments, more jobs and better technology.

Lower corporate income tax

The measure seeks to encourage investments by bringing down the corporate income tax (CIT) rate from 30 percent to 20 percent and modernize investment tax incentives to enhance fairness, improve competitiveness, plug tax leakages and attain fiscal sustainability.  The measure proposes to bring down the CIT by 2 percentage points every two years.

The bill will grant fiscal incentives only to registered activities of exporters and industries listed in the Strategic Investment Priority Plan.

It also grants the President the power to grant incentives if the project has a comprehensive suitable development plan and will bring in at least $200 million. It will also grant income incentives for a maximum of five years, removing the perpetual 5 percent on gross income earned and limiting the income tax holiday.

The measure provides that in lieu of ITH or reduced CIT, incentives may be extended on a per-industry only basis, upon BOI approval.

The Department of Finance projects it to generate some 1.4 million jobs, mostly in small and medium enterprises, over the next decade and create a business environment conducive to inclusive growth.

For his part, Finance Undersecretary Karl Chua said the set of incentives under Package 2 of the CTRP will be transparent, time-bound, targeted and performance-based.

Source: https://businessmirror.com.ph/2019/08/19/house-panel-rejects-peza-exclusion-plea/