THE PHILIPPINE Economic Zone Authority (PEZA) said incentive packages being prepared by the Finance department will send a signal of policy discontinuity that could turn away potential investors.
“We are actively selling the Philippines under this administration. Our investment promotion has been very aggressive,” Ms. Abordo said during the joint meeting of the House committees on ways and means and trade and industry. “Changing this (package) at this time really will send a message that there is no certainty of policy in the Philippines.”
The joint draft bill prepared by the Finance and Trade departments seeks to repeal all existing laws, including the incentives set under the 1995 PEZA charter, and is intended to serve as the sole piece of legislation to provide for incentives, according to Finance Undersecretary Jeremias N. Paul, Jr.
The new draft, which is awaiting the signature of Trade secretary Gregory L. Domingo before formal endorsement to both houses of Congress, proposes a 15-year limit on all incentives to be granted for export-oriented companies, which can only be extended to a maximum of 15 years subject to review of the investment board.
Among the options that can be availed by businesses under PEZA include availing of a 5% tax on gross income, as well as a 15% or 18% tax rate on corporate income in lieu of paying national and local taxes for 15 years. Income tax holidays may also be availed of only for the first four years upon start-up.
John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines, also warned that such provisions could run counter to the objective of attracting foreign direct investments (FDIs).
“Some companies would not come to the Philippines if they saw a period as short as 15 years. Other countries will offer them longer periods,” Mr. Forbes said. “They have other places to go, so I caution the committee to look very carefully at the potential implications of setting a deadline.”
Companies who dedicate at least 70% of their yearly production for export sale may also avail of exemptions from value-added tax (VAT) for the sale and importation of raw materials, packaging and capital equipment through a refund.
Mr. Paul countered to stress the importance of limiting the incentives, as these mean foregone government revenues, saying: “The thing is, we really have to make it time-bound. Incentives cannot be forever and ever.”
Questions were also raised as to whether or not the time cap for incentives will be applied on a per-project or a per-company basis, which the PEZA said could really drive away investors should it be the latter.
Under Republic Act 7916 or the Special Economic Zone Act of 1995, tax holidays may be enjoyed by companies from four to eight years upon start of operation, alongside availing of other tax incentives such as duty-free imports, exemption from wharfage dues, and zero-rated VAT.
“Just give us a little more time to work with this (current) set of incentives, especially at this time when we are gaining ground and the world is really starting to look at us,” Ms. Arbado said.
The administration has tagged reforms to fiscal incentives as a priority measure, counting on foreign investments to create more jobs and spur economic growth in the country.
The central bank has recorded beyond-goal net FDI inflows this year — which stood at $4.306 billion as of August, well above the country’s adjusted target of P1 billion; however, the amount still pales compared with those of neighboring countries.
The measure will undergo further deliberations alongside five similar House bills, according to ways and means committee chairman Rep. Romero S. Quimbo (Marikina, 2nd district).
“This is something that we will not rush,” the lawmaker said. “This is important, but we will thresh it out. We will certainly not please everyone, but we will make a certain degree of uniformity in giving out incentives because uniformity brings in more investments.” —Melissa Luz T. Lopez
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