Exporters registered with the Philippine Economic Zone Authority (PEZA) are poised to record higher cost of production with the removal of the value-added tax (VAT) exemption on their local purchases.
This could disrupt the momentum achieved last year.
Tereso Panga, PEZA deputy director-general, said the Corporate Recovery and Tax Incentives for Enterprises through recent issuances of the Bureau of Internal Revenue has put a fixed term for the locators’ enjoyment of tax and duty free importation privileges.
This means local purchases of goods and services will be subject to VAT.
The issuances will also have a big impact on the embedded utilities, facilities and developers if their operations will no longer to incentives.
Panga said PEZA locators are hoping for government’s reconsideration to ensure their business survival.
According to Panga, since the inception of the ecozones in the 1960s, tax and duty-free privileges had used this scheme as a selling point in attracting foreign direct investments (FDIs).
He warned the Philippines stands to lose in the competition for FDI in the region as Asean countries continue to enhance their fiscal incentives.
Ecozone investors account for 60 percent of the country’s total annual commodity exports and 80 percent of the total annual service exports.
In 2021, locators posted growth of 14 percent in export to $63 billion – Irma Isip
