The Philippine Economic Zone Authority (PEZA) and industry partners are proposing refinements to the Corporate Income Tax and Incentive Rationalization Act (CITIRA) bill., such as the adoption of the grandfather rule and the extension of the transition period for 15 years for the shift from PEZA’s current tax incentives to the scheme provided under the bill.
“While the agency supports the goals of CITIRA bill, PEZA aims to address the possible exits of foreign investors in the country’s ecozones to other countries as this will result in massive job losses for thousands of Filipino, thus affecting peace and prosperity in the country,” said Charito Plaza, PEZA director-general.
The longer transition period for companies to migrate to the corporate income tax regime from the 5 percent tax on gross income earned will allow for more predictability to PEZA locators.
The grandfather rule provides that existing locators will continue to enjoy some of the incentives under PEZA and the new rules apply to prospective locators..
According to Plaza, the proposed enhancement provisions to the CITIRA bill were based on 10 principles which she said aim to eliminate the negative effects of a change in the tax regime to investors: the risk of massive unemployment; red tape, constitutional infirmities, as well as the risk of the backlash from the international and global export manufacturing and exporters of information technology services.
Plaza added the provisions will result in a savings of P21 billion intended for Structural Adjustment Fund purportedly for those who will lose their jobs because of CITIRA.
Plaza and Secretary Ramon Lopez of the Department Trade and Industry and PEZA board chairman last month agreed they will submit their proposals for the pending bill for consideration of Congress.
In anticipation of the passage in the Senate of the CITIRA, PEZA held consultations with members of the Philippine Ecozones Association, Semiconductor and Electronics Industries in the Philippines Foundation Inc. , Information Technology and Business Process Association of the Philippines, Confederation of Wearable Exports of the Philippines and the various Foreign Chambers to include the Joint Foreign Chamber.
Other groups like the Trade Union Congress of the Philippines also gave their recommendations to the bill from the perspective of labor.
Their inputs aim to address the unintended consequences the bill might bring to the country like during the passage of the first Tax Reform for Acceleration and Inclusion Act and the Rice Tarrification Law.
“Our proposed enhancements seek to answer the pleas of the industry and labor leaders who are now in agony due to the uncertainties CITIRA created since its pending passage in the past years,” Plaza said.
But amid PEZA’s agreement with the DTI on the fine-tunings, other affected parties like the Union of Local Authorities of the Philippines Inc. (ULAP) still continue to push for a status quo on the current incentives.
In a letter addressed to President Duterte last October 22, ULAP expressed support to Administrative Order no. 18, which aims to accelerate rural progress in other parts of the Philippines. The group discussed their concern with the pending CITIRA bill.
ULAP president Governor Al Francis Bichara asked “how can we allow legislation to dampen the AO 18’s scenario of local economic growth even before it unfolds?” According to him, “the high probability of an influx of exporters into our ecozones is the best boost that the President has given LGUs toward self-governance.”
ULAP urged to preserve the status quo for PEZA and its existing regime of incentives and direct its efforts at farther enhancing the competitive advantage of doing business in the country.
The group also recommend to focus on full-scale commercial operation imperatives such as access to transportation and logistics infrastructures, establish terminals for food and raw materials, and reduce the cost and maintain the ease of doing business for both the local and national government level.