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PEZA drops objections to tax, incentives reform bill

PEZA Director General Charito B. Plaza (left) and Trade Secretary Ramon M. Lopez pose for a photo after their amicable meeting during which they agreed to cooperate in fine-tuning the proposed tax and incentives reform bill. (Photo from PEZA Facebook)

All’s well that ends well as the Department of Trade and Industry (DTI) and one of its attached agencies, Philippine Economic Zone Authority (PEZA), reconciled their differences and agreed to cooperate in fine-tuning the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA).

Trade Secretary Ramon M. Lopez and PEZA Director General Charito B. Plaza issued separate statements after attending a special PEZA Board meeting on October 9, 2019 to resolve the issues over the proposed CITIRA.

Lopez said he called for the special Board meeting to emphasize the importance of the measure and that the concerns of the stakeholders are being addressed.

Following the meeting, he said Plaza “will no longer ask for status quo or exemption from CITIRA.”

“We had to explain fully that there are ongoing refinements in certain provisions of the bill to address the serious concerns of the stakeholders, especially the existing PEZA locators, and a number of senators who are equally concerned on minimizing any possible repercussion on jobs if some firms leave the country,” Lopez said.

“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 (ITH) and lower tax rates for new projects in strategic, high-technology industries with preference on locating in least developed areas,” he added.

The proposed CITIRA, formerly known as the TRABAHO (Tax Reform for Attracting Better and Higher Quality Opportunities) bill, is Package 2 of the Comprehensive Tax Reform Program of the Duterte government.

The House of Representatives approved the CITIRA on third and final reading on September 13, 2019. The bill seeks to reduce corporate income tax (CIT), currently at 30%, by 2 percentage points every two years starting 2021 until it reaches 20% by 2029.

Related Story: House approves former TRABAHO bill, now known as CITIRA

A similar bill is pending in the Senate.

Plaza, who had been pushing for PEZA locators to be exempted from CITIRA, assured Lopez and the Department of Finance (DOF) that PEZA will help in fine-tuning the measure.

At the same time, she assured PEZA locators and the ecozone developers that PEZA will not abandon them but will instead work to allay their fears over the CITIRA provisions.

“The agency will never abandon the industries as the investment promotion agency is the mother goose of the goslings that lay golden eggs—the ecozone developers, who invested P5 to P25 billion in creating green and smart economic zones to attract industries, and the export industries, who brought their big capital investments and new technology, and created thousands of jobs,” she said.

She said PEZA will push for an increase in gross income earned (GIE) tax to 7% from the current 5% instead of the Corporate Income Tax (CIT) rate.

Plaza is also pushing for the following:

  • A fixed 10-year or 15-year transition period to be extended to the locators on a per project basis to provide for a common sunset period considering the usual term for the end of life of products and useful life of equipment.

  • Continued enjoyment of tax and duty free importation of production-related materials by ecozone locators to put them on equal footing with free port-registered enterprises.

  • Recognition of locators’ indirect/constructive exports as part of export sales since inter-zone sales create local value-adding and backward linkages.

  • Setting an amount of investments threshold for big-ticket or strategic projects that will be endorsed to the FIRB for review and confirmation.

“PEZA wants to end the agony of waiting and uncertainty caused by pending tax reform that has affected new investments and expansion projects of current PEZA-registered industries. We want to ensure continuous investments for the Philippines and for the jobs of Filipino people,” she said.

“We intend to help craft a landmark legislation that will enhance and promote investments to the Philippines to achieve the overall welfare and good of the country and the people,” Plaza added. (Ventures Cebu)

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