The Philippine Economic Zone Authority (Peza) has renewed its push to give itself more power over its tax perks while a move to rationalize tax incentives gains more ground in Congress.
Peza Director General Charito Plaza said in a statement last week that revising the agency’s charter had been “long overdue.”
“The proposed amendments to Peza law went through rigorous consultations and acquired the support of various stakeholders who see it an opportune time to update the 24-year-old law in the current global context of competition of economic zones,” she said.
“It is not a mere whimsical or political move to amend the Peza law, but a necessary legislative agenda for total development and industrialization,” she added.
Three separate but similar bills were filed in the 18th Congress. But in essence, these bills propose, among other provisions, to keep the gross income earned (GIE) tax that companies in economic zones pay in lieu of local and national taxes.
The Department of Finance, which believes that tax perks should be time-bound, wants to remove the GIE tax perk. The GIE tax perk theoretically could last forever since it has no expiration period under current rules.
In its amendments, Peza wants to increase the GIE tax perk from 5 percent to 7 percent instead, which will be remitted to both local and national government.
But Plaza’s efforts to revise the Peza law are facing a number of challenges from within the government itself as battle lines are drawn over where agencies stand on the issue of tax perks.
Peza’s amendments clash with the second tax reform package of the Duterte administration, which wants to just have one law to rationalize all the tax perks offered by investment promotion agencies like Peza.
The tax package, which will also lower the corporate income tax, is currently called Comprehensive Income Tax and Incentive Rationalization Act (Citira).
Enjoying the support of President Duterte himself, the bill, which was refiled after failing to get passed in the 17th Congress, has had a headstart compared to the Peza amendments.
The Citira bill has been approved by the House committee on ways and means, chaired by Albay Rep. Joey Salceda. It is up for second reading soon, according to a statement from the website of the House of Representatives earlier in August.
Meanwhile, the three bills amending the Peza law are still pending at the committee on economic affairs, Congress’ website showed.
Moreover, Peza also does not have the support of its board chair, Trade and Industry Secretary Ramon Lopez, who supports the Citira bill despite wanting to soften the blow for existing ecozone locators.
Peza’s amendments will remove Peza from the DTI’s jurisdiction and placing it instead under the Office of the President.
“Peza management does not need the lone approval of the Department of Trade and Industry’s secretary. In fact, he is against it from the very beginning,” Plaza said.