THE DEPARTMENT of Trade and Industry is studying a proposal from the Philippine Economic Zone Authority to provide incentives for domestic enterprises that will set up shop in Peza-managed economic zones, or foreign companies that will manufacture for the local market.
One such proposed fiscal incentive was the 5-percent tax on gross income earned (GIE) in lieu of all national and local taxes, Peza director general Lilia de Lima said on the sidelines of the CS Garment Inc. factory tour in Cavite yesterday.
At present, Peza ecozone locators can sell up to 30 percent of their output to the domestic market. But beyond that volume, companies will have to pay regular taxes and duties.
“We are suggesting a 5-percent GIE [as a form of fiscal incentive] for domestic enterprises as we need to also level the playing field. But we are still discussing these things,” De Lima explained. “We target to initially implement these in depressed areas in the Visayas to create employment there. Currently, a lot of foreign companies want to manufacture here, but catering to the domestic market. These are still proposals.”
Trade Secretary Gregory L. Domingo pointed out, however, that the prevailing issue of domestic enterprises locating at Peza ecozones was taxation, because the taxes imposed on Peza locators and domestic enterprises were different.
“We’re actually in the midst of formulating a policy on how to treat [taxation policies and assessment of duties]. The point raised was, if a Peza enterprise that is exporting wants to sell to the domestic market, what duties and taxes should be given?” Domingo noted.
“If we assess them on a regular duty rate, then we are in fact handicapping our own enterprises against our Asean neighbors because they will come in duty-free to the Philippines. And we don’t want that. We want a level playing field,” he added.