The Fiscal Incentives Review Board (FIRB) said the Philippine Economic Zone Authority (PEZA) has failed to disclose the inflow of actual investments made by its registered business enterprises (RBEs) to determine if these are commensurate to the value of fiscal incentives the locators enjoy each year.
The allegations were denied by PEZA.
The Secretariat of the FIRB, in a report to Finance Secretary Carlos Dominguez III, who also sits as chairman of the review body, said PEZA submitted incomplete information about the investment capital and market orientation of its locators when it was asked to send data to the FIRB as part of the compliance of investment promotion agencies (IPAs) with the provisions of the since the implementation of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
“PEZA did not give us the data on the actual investment. They said they are not monitoring that,” said Juvy Danofrata, Department of Finance assistant secretary and FIRB Secretariat head.
But in a statement, PEZA director-general Charito Plaza said the requirement to monitor the approved and actual amount of investments of the RBEs was imposed only under CREATE and that PEZA has until July 15, 2022 within which to submit its reports to the FIRB.
Tereso Panga, deputy director-general, said the agency will comply and submit its report within the prescribed deadline of July 15 using the template finalized only recently by the FIRB.
Panga said the template is a lot different from the one used for reporting previously under the Tax Incentives Management and Transparency Act.
He said PEZA has considerably more RBEs and new project approvals than the other IPAs cited by FIRB to have complied with the reporting. This, coupled with the large number of data fields in the new template, would require more time to process, he said.
“For the FIRB to state that PEZA does not monitor the inflow of actual investments is irresponsible and smacks of bad faith,” said Plaza, adding PEZA is confident that benefits of incentives to investments outweigh the foregone taxes.
“We find the statement by FIRB particularly erroneous, misleading and intends to embarrass PEZA as an IPA,” said Plaza.
Danofrata said 12 of the 196 PEZA RBEs did not contain information on their investment capital, while 11 did not specify their market orientation.
As of April 30, 2022, almost 10 months after the implementing rules and regulations of CREATE was signed, only four out of 14 IPAs were able to substantially comply with the reportorial requirements of the FIRB as mandated under the CREATE Act.
The four are the Bases Conversion and Development Authority, John Hay Management Corp., Poro Point Management Corp. and PHIVIDEC Industrial Authority.
“These reports are important to enable the FIRB to fulfill its monitoring and oversight function over the IPAs and the overall administration and grant of tax incentives,” Danofrata said.
The reports submitted by IPAs are shared with other government agencies, especially the Bureau of Internal Revenue, for monitoring, audit and other purposes consistent with the target outcomes of CREATE.
Danofrata said the FIRB Secretariat sent follow-up letters to the IPAs that have incomplete and missing submissions.
“Based on what the FIRB Secretariat has gathered so far, the Board of Investments tallied the highest amount of investment capital totaling P43.12 billion with 136 RBEs. Of these 136 RBEs, 9 are export-oriented firms and 127 are domestic-oriented businesses,” Danofrata said.
Danofrata said the IPAs including PEZA were able to register a total of 348 firms as of April 30, of which 100 are export-oriented and 237 are domestic-oriented enterprises.
“The real estate, services, and manufacturing sectors are the industries with the highest number of registered firms. Of the 348 firms, 25 have no information on their industry classification,” Danofrata said.
Real estate activities accounted for 129 RBEs, followed by the services sector with 73 and manufacturing with 68. With Irma Isip
