Peza loses traction under Du30 as pledges drop 36.5%

Describing its own state of affairs, the Philippine Economic Zone Authority (Peza) said investment pledges it attracted during President Duterte’s second year in office dropped 36.5 percent to P170.42 billion.

Peza noted the President’s second year had the “threat of incentive change,” referring to the administration’s push for tax reform.

Based on data collated by Peza covering July 2017 to July 2018, figures showed a huge drop from the P238.36 billion worth of pledges received during Mr. Duterte’s first year. The decline in pledges was mainly in manufacturing, information technology and business process management and ecozone development.

Last week, Peza Director General Charito Plaza called for a “the state of Peza address,” alluding to the President’s State of the Nation Address delivered on Monday.

Peza is opposing the government’s second package of the tax reform agenda. Peza said potential investors had been hesitating to make new business or expand their operations since the bill was seeking to remove some tax incentives.

“Peza investors are not market-seeking investors who would invest to compete and sell to the Philippine domestic market, but are efficiency-seeking investors that export and compete in the global market,” the agency said in a presentation of its performance under Duterte’s second year.

Peza said companies would only invest in countries “where they are assured of efficiency in cost through incentives” and in ease of doing business.

Elmer San Pascual, manager of Peza’s promotion and public relations, cited the impact of Peza’s tax perks, particularly the 5-percent gross income earned (GIE) tax.

Under the current system, Peza-registered companies can pay the GIE in lieu of all taxes, an attractive perk, which essentially has no expiration date.

This, however, could be removed under the new tax regime, with economic managers calling for a “time-bound” incentive package.

“When the law was amended in 1995, giving the 5-percent [GIE tax], immediately, our investment [pledges] grew to almost 450 percent,” San Pascual said.

In 1994, pledges under the then Export Processing Zone Authority only reached P9.6 billion. When the enabling law was amended the following year to make way for today’s Peza, the figure jumped to P52.5 billion, data showed.

“This has been the trend of our investments for the past 23 years. We accumulated P3.61 trillion in investment [pledges],” he said.