Beltran —FILE PHOTO
The Philippine Economic Zone Authority (Peza) has been peddling “erroneous and misleading” information in its effort to oppose the Corporate Income Tax and Incentives Reform Act (Citira), the Department of Finance (DOF) alleged.
“We are not against incentives, and we are not trying to remove Peza. We are simply trying to fix a long-broken system. When the government grants incentives, we want to do so for the right reasons—such as for job creation, investment in less-developed areas and investment in infrastructure,” DOF Undersecretary and chief economist Gil S. Beltran said in a statement over the weekend.
The DOF has been pushing for Citira’s passage in Congress in a bid to rationalize the generous fiscal incentives being enjoyed by investors while also reducing the corporate income tax rate to 20 percent from the current 30 percent—the highest in Asean.
The House of Representatives already approved Citira on Sept. 13, and the fight for its passage had been transferred to the Senate, where Peza was leading the opposition and seeking exemption from its coverage.
“[Peza] Director General [Charito] Plaza said they are ready for war, but we would at least expect them to be armed with correct information,” Beltran said, adding that “the statements made by the investment promotion agency (IPA) have been largely erroneous and misleading.”
Answering Plaza’s claim that Citira would shoo foreign direct investments away, Beltran replied: “We have to look at the bigger picture. [Foreign direct investments] have been on an upward trend since 2011. There is no doubt about that.”
“Looking at the data, we will even find that these FDIs are increasingly nonreliant on incentives. While more and more investments are coming into the country, the level of investment pledges through Peza, which are pledges made with the expectation that incentives will be granted, has been going down. Since our fundamentals are in place, incentives are becoming less and less of a factor for investment. Even before Citira was proposed, Peza investment pledges have been going down,” Beltran said.
“Furthermore, it seems that investors lately do not base their pledges on incentives given forever. In 2018, the largest amount of investment pledges came from firms registered with the Board of Investments (BOI), which does not grant incentives forever. Investment pledges with the BOI in 2018 amounted to $1.97 billion. Those with Peza only amounted to $1.3 billion,” the DOF official added.
Also, Beltran said that while Peza gave away the biggest amount of tax perks to investors in recent years, its supposed contributions to the economy were “not as grand as portrayed.”
“An estimated P5.5 trillion in tax incentives was given to Peza firms since 1995, while, in return, investment pledges with Peza over that period amounted to only P3.6 trillion. This means that Peza gave out more than it got back in promises of investments in the economy. And note that this amount constitutes promises only. Is this not a signal that we have to look more closely at our incentive system and account for the money we give out? That is what Citira seeks to do,” according to Beltran.