STIMULUS PACKAGE PUSHED
THE Philippine Economic Zone Authority (PEZA) said export companies need five years to recover from the impact of the new coronavirus disease 2019 and is pushing for an economic stimulus package instead of a new tax incentive regime.
Charito Plaza, PEZA director-general, is seeking P100-billion fund to build public ecozones in every region; P3 billion for skills training in these zones and; an additional P30 million per region for their ecozone design and masterplan.
Plaza is batting for a status quo on the incentives, power and authority of agency which she said are “tried, tested and proven as very attractive to investors and globally competitive.”
Plaza made the statement in reaction to the strong push to pass the Corporate Recovery and Tax Incentives for Enterprises (CREATE) which gives enterprises up nine years to enjoy tax breaks and then shift a lower income tax rate of five percent to 25 percent .
“The (incentives) should be enhanced instead with an economic stimulus package for exporters and ecozone operators which must be given at least five years reprieve to be able to rehabilitate from the effects of the COVID pandemic,” Plaza said in a text message.
She said CREATE must be applied to domestic enterprises which also need a well- calculated, manageable and a sustainable rationalized incentives package and a lower CIT.
If passed this week, CREATE immediately cuts the CIT rate by 5 percentage points to 25 percent by July and brings the rate down to 20 percent in five years,
“Five years is requested by our export companies for them to be able to rehabilitate from the effects of COVID to their businesses. That’s why our position is for a status quo on PEZA incentives so as not to make things complicated with having new policies and rules under a rationalized incentives (regime) The enforcement of CREATE will be very complicated as it changes the rules in managing and the giving of fiscal and non fiscal incentives,” Plaza said.
She shared the opinion of some economists that CREATE must be studied carefully and calculated well if it will really make exporters stay in the country or might just force them to transfer to more investor-friendly countries which are enhancing their incentives and are providing attractive stimulus to transferring companies affected by the COVID pandemic.
Plaza said even the four to nine years transition under CREATE will result to uncertainties whereas in a status quo, “ everything remains until a new law will address a new incentives regime for exporters.”
“Any provision of a transition period whether long or short Is not a guarantee that investors can cope up and recover from the effects of the pandemic to the global economy. The best guarantee we can give our existing and new investors is the status quo of our present incentives,” she said.
The pandemic and the ensuing quarantines had taken a toll on the operations of PEZA locators.
Based on the survey conducted for the period of May 1 to 25, there are around 1,701 PEZA-registered companies or just 64.58 percent of total companies nationwide that are operating either in full operations, skeletal, or work-from-home arrangements. Meanwhile, there are 933 companies or 35.42 percent nationwide have suspended their operations.
To date, PEZA has a total of 408 economic zones nationwide with 4,542 locator companies employing 1.6 million workers.
PEZA in a statement over the weekend said a total of 26 projects were approved by the agency for the months of April and May 2020 at its board meeting on May 21, the first and only noard meeting conducted since the implementation of the enhanced community quarantine in Luzon.
The projects will bring in P13.1 billion and are projected to employ 19,894 Filipinos.
In support of PEZA
The IT and Business Process Association of the Philippines (IBPAP) expressed support to CREATE but said Congress should consider granting existing investors and locators a five-year deferment of any changes to current incentives to counterbalance serious uncertainties brought about by the health crisis and give them ample time to recoup losses.
“After this much-needed deferment, we can then proceed with the sunset provisions,” the group said in a statement over the weekedn.
IBAP said CREATE should encourage new investors and locators to set up shop and expand operations in the Philippines by offering them a minimum of 10 years of incentives, and enable the country to compete with other nations that are aggressively vying to be the premier investment destination.
The group added the proposed Fiscal Incentives Review Board under CREATE should have jurisdiction over very large investments for say projects worth $1 billion and above while investment promotion agencies can continue to cover anything below that threshold; and
IBPAP said CREATE should keep the one-stop-shop nature of PEZA which it noted has been an effective proponent of the country as a premier investment destination.
Economic stimulus
Plaza said the P100 billion budget for public ecozones in every region will also fund the infrastructures, logistics transportation hubs, power utilities, facilities necessary in these areas.
These ecozones, she said, will help spread the jobs, technology and land development in the countryside.
They will also support the government’s Balik Probinsya program and will help create smart towns and cities and new metropolitan areas in every region with ecozones as drivers of growth in the 17 regions.
