Peza gives up, supports revamp of tax incentives

The Philippine Economic Zone Authority (Peza) has given up on its fight to exempt thousands of companies in economic zones from a controversial tax package that will rationalize tax incentives.

On Wednesday, the Peza board decided to support the Duterte administration’s second tax reform package, abandoning the fight the agency had waged both inside and outside of Congress for more than a year now.

Trade and Industry Secretary Ramon Lopez, who chairs the Peza board, said he called for a special board meeting on Wednesday morning to “emphasize” the importance of reforming the country’s tax incentives.

This ended with a resolution in support of the Citira, which stands for Comprehensive Income Tax and Incentive Rationalization Act.

“We had to explain fully that there are ongoing refinements in certain provisions of the bill to address the serious concerns of the stakeholders, especially the existing Peza locators, and a number of senators who are equally concerned on minimizing any possible repercussion on jobs if some firms leave the country,” Lopez said in a statement.

“The Peza DG (director general Charito Plaza) will no longer ask for status quo or exemption from Citira,” he added.

The bill will lower the corporate income tax, which is currently one of the highest in Southeast Asia. But it has drawn a lot of criticism for its move to also rationalize tax incentives, which critics fear would lead to job losses after companies fail to cope with the rising cost of doing business.

One of these critics included Peza’s Plaza, who is vice chair of the Peza board.

Plaza had previously said that she would not even compromise on the bill, calling it “dangerous” to even do so. On Tuesday, Peza had called for a roundtable discussion with industry top officials who would be affected by Citira, planning to make this a weekly meetup to further drum up support.

But on Wednesday, Plaza had sided with Lopez, even though DTI’s (Department of Trade and Industry) compromises—such as longer transition periods to give companies more time to prepare, as opposed to rushed change—have not yet been reflected in the actual bill.

“Peza wants to end the agony of waiting and uncertainty caused by pending tax reform that has affected new investments and expansion projects of current Peza-registered industries,” Plaza said in a separate statement.

This puts to question the interests of the industries that would be affected, from garments manufacturing to electronics exporters, and even business process outsourcing firms, who have set up shop in the country thinking the rules would always be consistent.

Their representatives did not respond for comment as of press time. But Danilo Lachica, president of the Semiconductor and Electronics Industries in the Philippines Foundation Inc., said Lopez might have encouraged other members of the board to back Citira.

The Peza board has 12 members, with representatives of different government agencies such as the Department of Agriculture and the Department of Energy.