The proposed second package of the Comprehensive Tax Reform Program will erode investors’ trust and confidence in the Philippines as an investment destination, the Philippine Economic Zone Authority warned Tuesday.
PEZA director-general Charito Plaza said the removal of the 5-percent tax on gross income earned under the proposed Comprehensive Income Tax and Incentives Reform Act would discourage ecozone developers and locators.
Under the proposal, the 5-percent tax on GIE paid by ecozone developers, operators and enterprises or locators in lieu of all local and national taxes would be removed.
Plaza said “the GIE is one of its highlight incentives attracting investors, so it is very crucial because revenues paid to national and local government are deducted outright from the gross income of companies.”
“It means that government has more to earn from the GIE and is secured of its revenues therefrom,” she said.
Plaza said the GIE was also significant for facilitating ease of doing business in the country. Under the present setup, PEZA investors remit 2 percent of their gross income earned directly to the local government and 3 percent to the national government.
“However, the removal of the GIE, as proposed by Comprehensive Income Tax and Incentives Reform Act would be a possible ground for corruption, leakages and inconvenience because investors would have to deal with various levels of bureaucracy,” Plaza said.
She said that PEZA’s incentives were tried, tested and proven to be competitive in attracting investors.
“Hence, PEZA incentives are performance-based from the beginning, not an afterthought. It aims to motivate and encourage companies to upgrade, grow and perform. PEZA has a validation process for this in order for locators and companies to avail of tax incentives,” she said.
She said PEZA was giving incentives only to products that are in demand in the market.
“In other words, incentives are not forever enjoyed by companies which fail to innovate and expand, thus, they lose the world buyers and close shop,” said Plaza.
PEZA registered-companies are required to strictly adhere to deadlines on fiscal and performance reports in order to avail and enjoy the tax incentives. Othel V. Campos
Upon implementation of the Tax Incentives Management and Transparency Act or RA 10708, 2015 companies were required to submit reports pertaining to the law.
Aside from the standard reports required by PEZA, enterprises are also required to submit reports under TIMTA which PEZA consolidates and submits to the Bureau of Internal Revenue and the National Economic Development Authority.
The reports include the incentives availed of by the PEZA enterprises and other data pertaining to the operations of enterprises such as investments, taxes paid and employment generated among others.
PEZA was acknowledged by the International Finance Corp.-World Bank as the only investment promotion agency which applies best practices among economic zones worldwide through its one-stop-shop policy and regulatory reforms.