Local governments back Peza in fight to maintain investors’ tax perks

The umbrella group of local government units (LGUs) urged President Duterte and Congress to exempt the Philippine Economic Zone Authority (Peza) from a move to rationalize the country’s tax perks.

In a resolution, the Union of Local Authorities of the Philippines, Inc. (Ulap) said the national government should let Peza administer the same incentives already detailed under its enabling law.

This comes amid a move to pass the second comprehensive tax package, which is now being questioned by some members of the business community.

Filed as House Bill 7438, it will lower corporate income tax while rationalizing the tax perks offered by investment promotion agencies, including Peza.

In defending Peza’s case, Ulap cited data from the National Economic Development Authority, noting that Peza’s economic contributions far outweigh the costs of giving out these incentives.

Peza uses tax perks such as income tax holidays to attract export-oriented investors to set up shop in the country. This, in turn, has led to the creation of over a million direct jobs and more than 4,000 companies locating in economic zones, it said.

“Ulap collectively urges the President and Congress to exempt Peza from the provisions of the proposed second package of the [Tax Reform for Acceleration and Inclusion law],” part of the resolution read.

The group called for the exemption “in order to preserve the authority of Peza to administer incentives under its charter.”

The group acknowledged Peza’s efforts, noting that the agency “largely contributed” to many aspects of the economy, such as foreign direct investments, export trade and countryside development.

Ulap said an exemption would help Peza get back on its feet, after official data showed investment pledges have been falling since February this year. Peza Director General Charito Plaza often blamed this on the uncertainty brought about by the proposed tax reform.

Official data showed pledges reaching P39.09 billion from January to April, 58.6 percent lower than the P94.39 billion recorded in the same period last year. This is the largest year-to-date drop in pledges so far.

Plaza previously said investors had the impression they were “not protected” amid the push for the proposed tax reform law.