A cost-benefit analysis (CBA) showing the positive impact of tax incentives on domestic production and exports reinforces the Philippine Economic Zone Authority’s (PEZA) call for a status quo on perks, according to PEZA director-general Charito Plaza.
In a statement, Plaza cited the initial findings of the CBA conducted by the National Economic and Development Authority from 2016 to 2018 which showed tax incentives appeared to help reduce poverty levels.
The study showed an average 94.5 percent of all exports were made by registered business enterprises (RBEs) under PEZA during the period.
Plaza quoted the CBA as saying “tax incentives increase domestic production” and “the export performance under the scenario with tax incentives indicated rising growth.” .
“The findings of the NEDA CBA shall be a credible study that evidence PEZA’s clarion call to the retention of its tax incentives because it is key attraction to export-based investments in the country. More than labelling tax incentives as foregone taxes, tax incentives helped generate investments, employments, and dollar earnings from exports. The findings in the preliminary study proves the importance and effectiveness of the tax incentives being given to investors and their presence in the country,” Plaza added.
NEDA conducted the CBA in relation to the Tax Incentives Management and Transparency Act covering 1,687 companies from eight investment promotion agencies.
In terms of employment generation, 78.09 percent of employment were generated by RBEs under PEZA, the study said.
RBEs under PEZA made an average 94.5 percent of all exports while they also acquired the most imports (92.7 to 97.0 percent). The manufacturing sector was highly dependent on imports, comprising around 96 percent.
RBEs under PEZA received most of the tax incentives, about P42.5 billion to P50.3 billion each year. This is equivalent to 16.6 percent to 18.26 percent of the corporate income tax recorded from 2016 to 2018.