Peza: Vetoed provision in Create Law may prompt investors to leave PH

·3 min read

THE Philippine Economic Zone Authority (Peza) has warned that locators may leave the country because of one of the items vetoed by President Rodrigo Duterte which may have a big effect on the country’s existing foreign direct investors.

This was the removal of the extension of availment of tax incentives by existing registered business enterprises (RBEs) given that the “extension of incentives for existing projects is unfair to ordinary taxpayers / unincentivized enterprises and further, only new activities and projects deserve fresh incentives.”

Under the Corporate Recovery and Tax Incentives for Enterprises (Create) Act, RBEs have no choice but to make do with the 10-year sunset period (after the lapse of income tax holiday) and thereafter, graduate to the regular 25 percent corporate income tax rate.

According to deputy director general for policy and planning Tereso Panga, the scenario could be a make or break for the Philippines as the affected ecozone locators, for example, might decide to retain their facilities and invest in new projects to be entitled to a longer income tax holiday and special corporate income tax period (total of 14 to 17 years).

Worse, they might just pack up and transfer to a more willing host-country that can offer better incentives for their investments as their availment of more advantageous incentives for sunk projects with the investment promotion agencies (IPAs) prior to the Create Law were cut short by the mandatory sunset period for RBEs, he added.

Welcome development

However, Peza Director General Charito Plaza remains hopeful that the locator companies “will be able to cope with the new conditions and the Philippine economy will be able to bounce back with a much inclusive growth for the country.”

Republic Act 11534 or the Create Act was signed into law on March 26, 2021.

The Create Law aims to gradually lower the corporate income tax rate from 30 percent to 25 percent and streamline the government’s fiscal incentives for investments covering both foreign and domestic enterprises.

“We are happy with the final Create Act after all those years of struggle. We recognize the need to gradually change and reform the national tax or revenue system yet at the same time address the need to maintain and attract investors’ confidence in the Philippines, especially during this time of pandemic,” Plaza said.

“Although Create may offer ‘win some, lose some’ opportunities for the different industries, we are glad that Create sustained our argument and has placed a high premium on export-oriented enterprises with their availment of superior fiscal incentives particularly for new projects that will be applied with the IPAs like Peza,” Plaza added.

Now that the passage of the Create law has come to pass, it creates stability in the taxation regime and Peza as the top export-oriented investment promotion agency can aggressively pursue marketing and promotion of its economic zones to global investors, Plaza said.

The Peza chief said there’s a need to communicate the impact of the Create law to export-oriented industries while pushing the momentum and efforts to attract investments through marketing and promotion activities. (JOB)