By Bernie Cahiles-Magkilat
The Philippine Economic Zone Authority (PEZA) has finally thrown in the towel over the Corporate Income Tax and Incentives Rationalization Act (CITIRA) Bill, but not without achieving some concessions to “fine-tune” the bill to keep the agency’s well-loved one-stop shop system and continued powers over the grant of incentives to its registered enterprises.
This developed after the PEZA Board held a meeting presided for the very first time by its Chairman and DTI Secretary Ramon M. Lopez, who earlier engaged in a word war against PEZA Director-General Charito B. Plaza for vehemently opposing the CITIRA Bill, which seeks to remove the generous five percent GIE tax to PEZA locators in lieu of lower corporate income tax.
“DTI and PEZA have reconciled their support to CITIRA with the ‘openness’ of the Department of Finance and DTI to fine tunings that won’t remove PEZA’s ease of doing business of its one-stop shop and in consideration of an enhanced gross income earned (GIE) tax,” said Plaza in a text message to reporters confirming PEZA’s change of heart over the CITIRA Bill.
In addition, Plaza said the Fiscal Incentives Review Board (FIRB) power is also to be fine-tuned with the level of review that will not downgrade PEZA’s granting of incentives and not create more red tape that will discourage investors.
When asked why the sudden turnaround, Plaza said, “There must be a happy compromise to end the agony which has created uncertainties affecting expansion plans and coming in of the new investment.”
For his part, Lopez also confirmed PEZA’s change of heart as he emphasized that the concerns of the PEZA stakeholders were being addressed.
“With these adjustments, the PEZA Board together with its management led by the Director General, has officially aligned its position to give strong support to the CITIRA and its parameters of having performance, based, time, bound, focused and transparent set of incentives.
“PEZA DG will no longer ask for status quo or exemption from the CITIRA,” he stressed.
Lopez said he called a special Board meeting of PEZA yesterday morning to emphasize the importance of the tax and incentives reform the government is pushing for, which has the mandate from the President and approved by the Cabinet.
“We had to explain fully that there are ongoing refinements in certain provisions of the bill to address the serious concerns of the stakeholders, especially the existing PEZA locators, and some senators who are equally concerned on minimizing any possible repercussion on jobs if some firms leave the country. To have a smoother transition, current discussions are on the number of years in the sunset provision for existing locators, as well as extra years of ITH and lower tax rates for new projects in strategic, high-technology industries with preference on locating in least developed areas,” he explained.
Until yesterday, PEZA led by Plaza had been consistent in its position against the CITIRA Bill, previously TRABAHO Bill. PEZA investors, who are enjoying a “perpetual” 5 percent GIE in lieu of all other national taxes and after exhausting the income tax holidays, rallied behind the retention of the current incentives.
Supported by different foreign business chambers and local business organization, PEZA and its allies stood pat for a “status quo” of the current incentives regime stressing the CITIRA Bill will definitely scare investors, push existing companies to relocate and cause the dislocation of thousands of workers of these export-oriented economic zone locators.
With this strong opposition, PEZA caught the ire of its chairman Lopez, who aligned himself with the DOF in the Duterte’s government’s efforts to overhaul the country’s tax incentives system for investors making it strictly time bound.
With this compromise with DTI and DOF, Plaza said that “PEZA will continuously listen to our industries and protect hat is working in PEZA.”
With a hint of a complete surrender, Plaza, who earlier said that PEZA “cannot be bullied,” added, “At the end of the day, we will leave it to the wisdom of the senators and the President for a beautiful law.”