AROUND 66 percent of the total industries in the Mactan Economic Zone (MEZ) have remained operational as Lapu-Lapu City continues with its general community quarantine status.
Philippine Economic Zone Authority (Peza) Director Charito Plaza said 34 percent were non-operational as of June 5, 2020 due to factors like lack of supply and cancellation of orders, among others.
“I think our locators have already adjusted. We’re addressing the needs of housing, and we will construct dormitories and permanent shuttle service operators for the zones so whether there is a pandemic crisis or none, operation will continue,” Plaza told SunStar Cebu.
Assistance to locators
Plaza said Peza has been extending assistance and reprieves to locator companies in the face of the Covid-19 pandemic.
These include the 90 percent limit on work-from-home (WFH) arrangement until December 2020 and allowing Peza-registered enterpises to establish workspaces in non-Peza registered sites, subject to compliance with Peza’s memorandum circular 2020-011 until Dec. 31, 2020. However, the VAT-zero rating incentive shall not be granted or applicable to these non-Peza registered sites.
Moreover, Plaza said expenses of providing temporary housing/accommodation to the employees, costs for providing shuttle services for the employees, port charges, costs for disinfection conducted by the company to its work area/facility/premises and Covid-19 tests for the employees during the community quarantine are deductible from the locators’ five percent Gross Income Tax (GIT) incentive.
“We need stable laws, lowered power costs and we need to be export- and production-driven, especially in this Covid experience that taught us to be self-reliant and self-sustaining,” said Plaza during a virtual press conference Tuesday, June 16.
Meanwhile, Peza earlier appealed to the country’s economic managers to retain the incentives enjoyed by the Peza locators amid fears of closures due to the global recession.
“Due to the Covid-19 pandemic and world recession, export companies are now infusing and consolidating their operations and investments, transferring their production quota to more investor-friendly countries that offer lower cost of doing business and a generous incentive package.
“Definitely, the Philippines has been branded as a country with high cost of doing business and unstable economic and trade policies. That has always been the complaint of our investors who despite these uncertainties still brought their investments to the Philippines because the efficiency of Peza and its globally competitive incentive package compensated for the high cost of doing business in the country,” said Plaza.
“This is why we are appealing for the status quo on the tried and tested incentives of Peza, instead of entering into a new incentive regime under the Corporate Recovery and Tax Incentives for Enterprises Act (Create), as well as provide economic stimulus to improve the efficiency factors such as public works infrastructure, IT infrastructure, logistics and transportation hubs, low cost of utilities, a highly skilled workforce, a vibrant and complete supply chain, and stable investment and trade policies,” she added.
The Create Bill was previously known as the Corporate Income Tax and Incentives Reform Act.
Economists from the country’s top universities expressed their opposition to the proposed bill in its current form on the grounds that “enterprises in export zones under the Peza will suffer from the Create Bill since their privilege to pay the GIT of five percent will expire after four to nine years. In addition, the Create Bill proposes a flexible special incentive scheme that replaces rules by discretion. Peza enterprises and foreign investors do not welcome this change from rules to discretion which is fraught with risk and uncertainty. And we simply cannot afford to add more uncertainty during this fragile recovery period from the Covid-19 pandemic.”
They also claimed that the Create Bill “sends a message of uncertainty to existing locators in Peza, aggravating their already tenuous financial situation due to Covid-19 and generating a real risk of reducing the country’s export capacity and growth prospects in the years to come.”
They, therefore, recommend in their petition to unbundle the important segments of the Create Bill and to deliberate each segment in separate bills: one for corporate tax reforms and another for special fiscal and investment incentives, and another for Peza. Hence, reiterating that the status quo on Peza incentives be maintained, pending the enactment of a consolidated incentive act.
“Instead of tinkering with current provisions of the tax incentives which are effective and working, Peza calls for its enhancement so that present investors already here will stay,” said Plaza.