The Philippine Economy Zone Authority (PEZA) on Tuesday denied that it was delaying the passage of the Corporate Recovery and Tax Incentives for Enterprises (Create) Act and going against the Duterte administration’s efforts to implement economic reforms.
In a statement, PEZA Director General Charito Plaza called it “unfortunate” that just because of fulfilling her duty as the agency’s chief, “I will be accused [of being] the cause of delay of the passage of Citira (Corporate Income Tax and Incentives Reform Act) or Create and maligned [as] going against the President and the PEZA Board because of my reasoned, pro-investment [and] pro-people position and constructive comments about” the previous and latest versions of the second package of the government’s Comprehensive Tax Reform Program.
“Any challenge or constructive comment [about] Citira/Create should be welcomed by Congress because a healthy debate based on factual data and correct information from various stakeholders will help in attaining legislation that is mutually acceptable to the government, investors and the stakeholders of a bill,” she added.
Plaza’s statement comes after Albay Rep. José María Clemente Salceda alleged that the proposed law was already delayed by Plaza’s move to “go against the PEZA Board and the President.”
Create seeks to cut the corporate income tax (CIT) rate from the current 30 percent to 25 percent by next month, and trim it further by 1 percentage point annually starting in 2023 to reach 20 percent by 2027. Citira had aimed to reduce this rate from 30 percent to 20 percent in 10 years.
Create also seeks to extend the applicability of the net operating loss carryover for losses incurred in 2020 from the current three years to five, which would allow companies to deduct incurred losses from tax payments for a longer period.
“What the PEZA Board voted is to support the tax reform measures and allow PEZA to introduce the appropriate amendments to keep our existing investors, attract more investors and enhance the economic gains under the Duterte administration,” Plaza said.
“Our appeal is an institutional decision to oppose specific provisions of Citira/Create because of its adverse effects [on] PEZA-registered enterprises and the Philippine economy in general,” she added.
PEZA reiterated its push to keep the fiscal incentives now enjoyed by firms located in the economic zones, arguing that these and the “enhanced economic stimulus can make our investors stay, as well as attract more ecozone developers to create more ecozones in the countryside, allowing the spread of investment and jobs.”
Meanwhile, the Joint Foreign Chambers of the Philippines (JFC) said that although it supported the CIT’s immediate reduction, it wanted the rate to reach 20 percent by 2025.
“We also strongly recommend a five-year delay in the rationalization of fiscal incentives for existing incentivized exporters who are harmed by the severe local and global impact of the pandemic,” the JFC in a statement on Monday night.
“For these existing investors, who employ over 2 million Filipinos, we seek a five-year pause to recover their viability,” it added.
The group also expressed support for the Philippine Economic Stimulus Act (PESA), which it described as “very comprehensive.”
“PESA focuses on directly supporting financially the most severely damaged sectors of the economy to assist them during their road to recovery. Unless ‘stimulated’ with financial assistance from the government, many firms will cease to operate and will lay off workers,” they said.