Employment opportunities in ecozones
If at first you don’t succeed, try and try again.
This adage seems to inspire Philippine Economic Zone Authority (Peza) Director General Charito Plaza in her continuing effort to exempt the country’s economic zones from the coverage of the proposed Corporate Recovery and Tax Incentives for Enterprises Act (Create).
The Create bill aims to, among others, rationalize the tax incentives being enjoyed by companies that operate inside the country’s ecozones.
According to the Department of Finance (DOF), those tax breaks have for years deprived the government of billions of pesos in revenues. It believes it’s time those privileges are reviewed and granted based on specific measurable parameters to maximize their benefits to the economy.
Although Plaza had earlier been rebuffed by the DOF, which exercises administrative supervision over her office, she persists in pushing to keep those benefits for Peza-registered companies.
In an online event, she said investment commitments in ecozones from January to October dropped to P72.65 billion compared to P99.32 billion in the same period last year.
She attributed this decline to the COVID-19 pandemic and the uncertainty caused by the Create bill. She said “while other countries are lowering their taxes, adding more business reliefs and assistance by granting more incentives … here we are changing the rules in the middle of the pandemic.”
Plaza raised a valid point. With the global economy still reeling from the adverse effects of the pandemic, this is not the time to introduce economic or regulatory measures that may or tend to discourage foreign investments in the Philippines.
Perhaps, if COVID-19 did not rear its ugly head, the Create bill could be looked at as a reasonable measure to raise additional revenues. No doubt, some ecozone tax incentives have outlived their usefulness or are no longer consistent with the purpose for which they were given.
That was two or three years ago. Unfortunately, the Philippine economy has been blindsided by a virus that has resulted in the closure of thousands of businesses and, in the process, the loss of jobs by millions of Filipinos.
With the economy in recession and local business people adopting a wait-and-see attitude on how things would pan out in the new normal, it is doubtful if additional employment opportunities would be available any time soon.
The business stimulation programs proposed by the government are still languishing in Congress. Even if they are enacted into law tomorrow, it would take months before they can be implemented.
For now and probably up to next year, new jobs may have to come from foreign investments, either new or by way of expansion of existing investments.
And this is where the ecozones have a decided advantage. With operational rules and infrastructure already in place, there is no need to reinvent the wheel, so to speak, for the new export-oriented businesses or for those that want to increase their manufacturing capacity.
Bear in mind that the majority of these ecozones are in the provinces and so the availability of employment in those areas helps reduce migration to Metro Manila and other urban areas to seek gainful employment.
With the Create bill as reference point, it’s a choice between maintaining or increasing employment opportunities in ecozones and raising additional revenues from reduced tax incentives for Peza-registered business enterprises.
The benefits of continuing or increased job opportunities would be immediate. Their recipients would be assured of food on the table or money to sustain their daily living requirements.
Whether or not the Create bill, if enacted into law, would accomplish its revenue-raising objective remains to be seen. The lead time in the collection of new taxes is at least six months from the date of their effectivity—assuming the revenue collectors scrupulously perform their tasks.
And even if promptly collected, there is no assurance the money would be spent for their intended purposes and not find its way into the pockets of corrupt government officials.
Under the present circumstances, between jobs and taxes, the former should be given priority. INQ
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