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Wednesday, November 22, 2017

PEZA fears losing P250 B annually with cap on juicy perks in tax reform

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By Bernie Cahiles-Magkilat

State-owned Philippine Economic Zone Authority (PEZA) said the country is expected to lose P250 billion annually, under the government’s planned tax reform program, which seeks to cap the juicy tax perks granted to its investors.

This developed as the House-approved tax reform version would mean PEZA enterprises losing the 12 percent value added tax (VAT) exemption on their local purchases.

The Department of Finance, however, said it will refund the VAT claims within a 90-day period.

While this promise of a refund is just fine to some, Plaza said that feedback from its enterprises was largely negative. PEZA Director General Charito B. Plaza noted that based on its computation, local purchases of materials and manufacturing inputs by PEZA companies reached an average of P250 billion annually.

If these companies cannot wait for the 90-day refund period, then they might just import all these local inputs at cheaper and higher quality because they are also entitled to zero duty on their imported inputs.

“If they cannot wait for the refund, we are going to lose these huge business transactions because our investors can just import these materials at cheaper cost and of better quality because they are also allowed to import their supplies raw tax and duty-free,” said Plaza.

The other PEZA incentive the Department of Finance would like to limit is the 5 percent tax on gross income earned (GIE) that its investors enjoy perpetually. This incentive is granted after the expiration of the registered enterprise’s income tax holiday.

“These are billions worth of investments that will be lost to the country. But incentives are the reasons they came here, so please give us the chance to realize these,” Plaza noted as she appealed for a status quo of the PEZA tax perks.

PEZA is targeting between 200 to 300 percent increase in investments this year over 2016 total of P218 billion, which was 26 percent lower than its 2015 performance. At 200 percent growth, investments in PEZA this year could reach P654 billion and over P872 billion at 300 percent growth.

Plaza said they support President Duterte and Finance Secretary Carlos Dominguez III but Plaza said, “We also to appeal for balance.”

Instead, Plaza urged that DOF should better run after the many tax evaders through efficient tax collection.

“That should be their main priority,” she said adding that an investor is the “goose that lays the golden eggs.”

She explained that industries, like the BPOs, create jobs that would lead to improved purchasing power. With higher income, she said, people can buy properties which will then be subject to taxes.

As of now, PEZA-registered enterprises contribute 80 percent of the country’s total exports.

“Why change the rules when there is nothing wrong in the program to doing business in the country,” said Plaza, who has reiterated for a status quo on the PEZA set of incentives.

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