PEZA EYES TWO TAX REGIMES

As the Philippines grapples with job losses and tough competition for investments in the pandemic, the Philippine Economic Zone Authority called on the Senate to consider instead two separate regimes of tax incentives for export and for domestic market enterprises.

“The Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill which aims to rationalize fiscal incentives for both export and domestic companies should instead be focused on applying only to domestic market,” said PEZA Director General Charito “Ching” Plaza.

Plaza said that “We are still in the state of calamity. Philippine economy is suffering with uncertainties that are created by the COVID-19 global crisis and the uncertainties of the CREATE bill. Passage of CREATE bill is in bad timing. Its passage is insensitive with the companies struggling to operate, keep jobs, and that contribute to keep the economy afloat. Also it will badly affect competition for new investments in our export industry.”

The PEZA Chief explained that “It is detrimental strategy to apply new tax incentives regime to export-based companies when in fact PEZA’s tax incentives is globally-competitive, tried, and tested for attracting investments that other countries try to compete with.”

“Moreover, as shown in the recent NEDA’s initial key findings from cost benefit analysis (CBA) on tax incentives from 2016 to 2018, PEZA is vindicated with the finding that its tax incentives indeed generate more investments and contribution to the economy,” she added.

CREATE bill aims to rationalize fiscal incentives uniformly both to export and domestic markets. Meanwhile, aggressively competing ASEAN neighbors had been adjusting both their fiscal and non-fiscal incentives to attract transferring companies and keep existing investors amidst the pandemic where operations of companies are volatile. Why CREATE bill must apply only to domestic market The PEZA Chief underlined that “Exporters should not be equated with domestic companies that only produce for the local market. The two are different in context. The exporters compete in a global market and face tougher competition from international competitors, while domestic market only focus on local consumers and few competitor.”

“In terms of tax incentives, it is a crucial factor for export-based investors as part of ease and cost of doing business. Investors compare tax incentives in different countries. However, PEZA’s incentives and brand of service in one-stop-shop and non-stop shop are internationally renowned already and globally-competitive. Hence, there is no need to tinker with it. When we tinker with PEZA’s tried and tested incentives that keep our investors, it threatens companies that can opt to transfer their investments abroad. They can leave and it means job losses for Filipinos,” said Plaza.

“On the other hand, domestic market is the one that needs to experience tax incentives and be incentivized with their market. In addition, establishing or changing their tax incentives won’t be large threat to the economy because they don’t necessarily leave the country and transfer capital,” explained Plaza.

The country needs export income as part of its Gross Domestic Product (GDP) and to generate investments and jobs.