The Philippine Economic Zone Authority fears the global economic slowdown caused by the COVID-19 pandemic might prompt companies to pull out of the Philippines and transfer to more investor-friendly countries.
Peza Director General Charito Plaza said in a briefing on Tuesday that the state-run agency is doing what it could to keep its current locators, but she could not shake off the fear that they might leave at some point.
For now, no locator has left. But that may quickly change given global dynamics and the aggressive campaign of other countries to lure foreign investors by granting longer tax breaks and bigger tax cuts.
“What I’m afraid here is that with the world in recession, there might be export companies who will consolidate their resources, so they have to stop or close their other branches in the world and concentrate their resources in countries which are investor friendly [and] where the cost of doing business is low,” she said.
“In this pandemic, in a world in recession, it’s difficult to look for new investors. We must create an impression that investing in the Philippines will cost them less,” she said.
For example, Indonesia plans to cut its corporate income tax to 22 percent this year from the current 25 percent, according to a report from Nikkei Asian Review.
The Duterte administration, on the other hand, wanted to lower its CIT from 30 percent to 25 percent this July, but the bill that would have made this happen failed to pass in Congress back in June.
The bill is called Create, or the Corporate Recovery and Tax Incentives for Enterprises Act. It will also rationalize tax breaks, a move opposed by Peza as it might drive up costs for current exporters.
From January to May, Peza only registered P29.54 billion in investment pledges, nearly 32 percent lower than the pledges registered in the same period last year. INQ