The Philippine Economic Zone Authority (PEZA) board, chaired by the secretary of the Department of Trade and Industry (DTI), on Wednesday said it now supports the Corporate Income Tax and Incentives Reform Act (Citira) so long as there will be “openness” to fine-tune provisions under the measure.
This was a reversal from the investment promotion agency’s previous stance on the proposed bill crafted by the Department of Finance (DoF) seeking to bring down the corporate income tax to 20 percent from 30 percent at present as well as harmonize fiscal incentives.
The latter portion of the proposal is especially challenged by PEZA and industry groups, given its plan to remove tax perks extended by PEZA to registered firms, a move seen adversely affecting investor confidence in the country.
PEZA director general Charito Plaza, who pushes for the exemption of PEZA locators from the Citira, said the DTI and PEZA have “reconciled their support to Citira with the openness of the DoF and DTI to fine-tuning that won’t remove PEZA’s ease of doing business of it’s one stop shop and in consideration of an enhanced gross income earnings (GIE).”
Among others, PEZA under Plaza wants the retention of the tax perk given to PEZA-registered firms, which allows the companies to remit five percent of their GIE directly to the local and national government in lieu of paying all local and national taxes.
Instead of completely removing it, PEZA is pushing for a higher GIE, arguing that the incentive method is least susceptible to corruption.
“There must be a happy compromise to end the agony which has created uncertainties affecting expansion plans and coming in of new investments,” Plaza said on Wednesday following a board meeting presided by DTI secretary Ramon Lopez.
Lopez, who serves as chairman of the PEZA board, said the reconciliation of the agencies’ stand comes after the DTI’s “explanation of DoF, DTI and Senate discussions.” In a statement, he confirmed that PEZA will no longer be lobbying for a status quo or exemption from Citira.
“To have a smoother transition, current discussions are on the number of years in the sunset provision for existing locators, as well as extra years of income tax holiday and lower tax rates for new projects in strategic, high-technology industries with preference on locating in least developed areas. It was emphasized that the concerns of the stakeholders are being addressed,” Lopez said.
The Senate Ways and Means Committee has started hearing the measure after its quick passage at the House of Representatives.
Additionally, PEZA is also supporting the Citira on the condition the powers of the Fiscal and Incentives Review Board will be fine-tuned “with the level of review that will not downgrade PEZA’s granting of incentives and not create more red tape that will discourage investors.”