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Foreign chambers say IPAs need leeway in tax perks

DECEMBER 7, 2021

The Fiscal Incentives Review Board (FIRB) is being urged to provide investment promotion agencies (IPAs) more authority in granting tax incentives by increasing the capital threshold for projects requiring FIRB approval.

Officials of foreign chambers said at a virtual briefing on Tuesday that IPAs like the Philippine Economic Zone Authority (Peza) need to have more discretion when it comes to approving the investment.

As such, this calls for another look at the current version of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

“We wanted a much larger threshold for the FIRB,” American Chamber of Commerce of the Philippines Senior Adviser John D. Forbes said, as this will facilitate “speedy approval” of the application.

The implementing rules and regulations (IRR) of the tax reform measure gives FIRB the power to grant tax incentives. If the capital is P1 billion or below, the concerned IPA has the authority to do so.

For investments above P1 billion, the FIRB shall decide on the investment application upon the recommendation of the IPA.

This is seen to pose problems with certain big-ticket investments, like those of the electronic and semiconductor industry, as it could prolong the approval process.

“Peza, they have been able to do this extremely well and you didn’t need another bureaucratic level above that,” Forbes said.

As such, Australian-New Zealand Chamber of Commerce President Daniel Alexander said that “any change to Peza or granting them additional power that will help them to attract investment can be seen as a positive.”

“It is remarkable how resilient foreign direct investments have been. Clearly, Peza is an enabler that should only be strengthened and not weakened,” European Chambers of Commerce of the Philippines President Lars Wittig added.

Regional operating HQs

Meanwhile, Philippine Association of Multinational Companies Regional Headquarters, Inc. (Pamuri) Executive Director Celeste Ilagan called for the inclusion of the regional operating headquarters (ROHQ) activities in the Strategic Investment Priority Plan (SIPP).

This, as she revealed her worries about the transition to the higher 25-percent corporate income tax next year from the current preferential tax rate of 10 percent.

“I don’t know if an amendment of CREATE will be able to cure that. But we at least would like to see that activities like ROHQ can continue to register with an investment promotion agency, enjoying the incentives that CREATE has put up for all investors,” she said.

SIPPt, which will provide fiscal and non-fiscal support for certain industries under CREATE, hopes to boost creation of high-skilled jobs, attract foreign investments, promote export diversification and ramp up developments in the countryside.

Trade Secretary Ramon Lopez identified earlier the following as critical industries under SIPP: electrical and electronics; chemical and pharmaceuticals; machinery and transport; agriculture and agribusiness; information technology-business process management; research and development; and artificial intelligence, automation, robotics, and digital technologies.

While there is no SIPP yet, the FIRB is adopting the 2020 Investment Priorities Plan for now.

This week, House Committee on Ways and Means Chairman Joey Salceda urged the Department of Trade and Industry to finalize the SIPP before March next year to “end the uncertainty” over foreign direct investments.