The country’s trade chief has declared that bills seeking to enhance fiscal incentives granted to economic zone firms will be scrapped, saying these proposed measures contradict the objectives of the government’s Comprehensive Tax Reform Program.

Trade Secretary Ramon M. Lopez said he is certain that lawmakers will junk legislative moves to amend the charter of the Philippine Economic Zone Authority (Peza). These amendments aim to strengthen the roles and functions of the agency, enhancing, in the process, the incentives it is authorized to honor to locators.

Lopez stated he was not even consulted by Peza Director General Charito B. Plaza when she submitted to Congress her proposal to amend the agency’s charter.

“We have one tax reform in this government. First, Plaza filed it. It is the director general who filed it, not the Peza Board. I’m the chairman of the Peza Board. The proposal failed to reach my desk. That is not the official Peza [position], and I was bypassed,” Lopez told reporters last week.

“[Second], it is not aligned with the government’s tax-reform program. I, as the DTI [Department of Trade and Industry] secretary, am aligned with the tax-program. I talked to her [Plaza] about it before, but, when she did it, I did not intervene because it won’t fly,” he added.

Under the 18th Congress, there are three measures filed to amend the roles and functions of the Peza. House Bills 3654, 3747 and 3897, if passed, will strengthen the agency’s authority over its menu of tax perks, which will collide with the provisions of the Corporate Income Tax and Incentives Rationalization Act (Citira) bill.

The Citira bill will reduce corporate income tax to 20 percent by 2029, from 30 percent at present, at the expense of incentives granted to economic zone firms.

“We have one tax reform in this government. First, Plaza filed it. It is the director general who filed it, not the Peza Board. I’m the chairman of the Peza Board. The proposal failed to reach my desk. That is not the official Peza [position], and I was bypassed.”

Trade Secretary Ramon M. Lopez

The measures will also transfer Peza to the authority of the Office of the President from the DTI. It will also promote the director general of the Peza to the rank of a department secretary, who shall be appointed by the President and shall serve a term of six years, unless renewed or removed for a cause.

“We only have one tax reform [program] and, frankly, the incentives being offered are good and reasonable. There are no other countries that offer incentives for forever. We are the only country that does, and it has to change,” Lopez explained.

“It is not aligned with the government’s financial reform program, which the DTI has already agreed [upon]. What we want in the DTI is a soft landing for the existing [locators] for soft transition [to the Citira bill provisions],” the trade chief added.

Locators will need to relinquish their incentives, including the 5-percent tax on gross income earned in lieu of all local and national taxes, if the Citira bill is applied to them which are provided with up to five years to do so.

On the other hand, the DTI is of the view that economic zone firms should be given up to 10 years to transition to the Citira bill’s fiscal regime. This is also the standing appeal of industry groups, whose members are operating in economic zones, demanding longer transition and, if possible, maintenance of status quo on grant of incentives.

Image Credits: DTI