With $1 billion potential investments already lost due to uncertainties brought about by the tax reform, the Philippines may end up with ghost buildings and vacant lots if incentives to companies registered in the Philippine Economic Zone Authority (PEZA) are rationalized under the Corporate Income Tax and Incentive Rationalization Act (CITIRA).
Maintaining a non-negotiable stance against a shift to corporate income tax (CIT) regime, PEZA director-general Charito Plaza is taking up the cudgels for ecozone locators to retain their tax on gross income earned (GIE).
PEZA locators, however, are open to raising the rate to 7 percent with a transition period of up to 10 years.
In a hastily-called press conference yesterday, Plaza explained she did “not feel alluded to” by statements made on Tuesday night by President Duterte that a member of the economic team will be fired because “she” is “not at par with the others.”
Plaza has come at loggerheads with members of the economic team over the eventual scrapping of the GIE as an incentive to PEZA locators and replacing it with the corporate income tax scheme.
“It is my moral duty and legal responsibility to speak up because these are PEZA clients that are affected, 4,700 plus companies,” she said.
Plaza said Sen. Bong Go on Tuesday has agreed to arrange her a meeting President Duterte to seek his intervention and get PEZA companies exempted from CITIRA after several attempts to do so were “blocked.”
At yesterday’s press conference, Plaza was joined by F. Francisco Zaldarriaga, president of the Philippine Ecozones Association (Philea); Dan Lachica, president of the Semiconductor and Electronics Industries in the Philippines Inc.; Rosette Carillo, associate director of the Confederation of Wearable Exporters of the Philippines; Celeste Ilagan, representing the Information Technology Business Process Association of the Philippines and; John Forbes of the American Chamber of Commerce of the Philippines.
Zaldarriaga said ecozone developers have stopped building and expanding since locators stopped expansion plans as well.
“If these guys exit, we will be left with vacant buildings.. we will be the big losers. Investments in brick and mortar are not transportable,” he said.
He said developers spend P3 billion to P5 billion per ecozone and some have acquired additional land in anticipation of new and expanding locators.
Ecozones now have additional inventory
Lachica said about $1 billion investments have exited to China since 2017 with about 10,000 to 15,000 potential jobs lost in the process.