The head of the Philippine Economic Zone Authority (PEZA) renewed her call to retain tax incentives of export-oriented companies as competition to attract investments heats up in the Southeast Asian region.
“We need to adapt in this pandemic and remain competitive to attract more investors and keep the ones we already have,” PEZA director general Charito Plaza said in a statement.
Plaza said that to maintain confidence in PEZA’s brand of ecozone attraction, “our position is for the retention and enhancement of the incentives package which is tried, tested, and globally-competitive especially in this time of pandemic.”
“The retention of the tax incentives will keep our 4,587 export companies and 408 economic zones (both vertical and horizontal ecozones) and the directly and indirectly employed Filipinos in various ecozones,” she added.
PEZA has been opposing the current form of the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), a tax policy-reform bill that seeks to accelerate the reduction of the corporate income tax rate from the current 30% to 25% by July 31, 2020. The previous Corporate Income Tax and Incentives Rationalization Act bill sought a gradual reduction over a period of 10 years.
The PEZA chief explained that changing the rules and system will serve to discourage export companies that are trying to keep their investments and jobs in the Philippines amidst the pandemic.
“In an atmosphere of world recession and export companies looking to consolidate their resources and transferring to other profitable countries with better incentives, we must seek to assure our current investors that the Philippines remains the best investment haven hub in Asia because of our one-stop, non-stop shop,” she said.
ASEAN countries incentivize
Plaza noted that many investors in China are seeking to branch out to different neighboring countries or return to their home country. Aware of this, Association of Southeast Asian Nation (ASEAN) countries are calibrating their policies and incentives to attract these investors and counter the impact of the COVID-19 pandemic.
Several ASEAN countries have issued incentives in the form of fiscal and non-fiscal incentives as well as cash handouts.
Vietnam is already preparing to give out incentives in the form of tax breaks, delayed tax payments, and delayed fees in land use to businesses. Indonesia plans to set up more industrial parks by 2024 and reduce its corporate tax from 25% to 20% in the coming years.
Malaysia is coming up with tax exemptions for manufacturers that will invest at least $117 million in the country. Thailand is looking to extend a tax break for companies in the health care industry as the pandemic highlighted the world’s dependence on China for masks and other personal protective equipment.
Cambodia has published regulations that are more lenient toward the import of raw materials, parts, and accessories used for textile and garment production. Additionally, companies heavily affected by the disruption of production will be granted tax holidays for up to one year.
“In light of the CREATE bill, let us remember that these incentives have been working from the start,” Plaza stressed.
She further appealed that “we do not cause fear and uncertainty in the hearts of potential investors and even those who are already here” to keep those who are already here and imbue confidence in those looking to possibly invest in the Philippines.
PEZA, meanwhile, noted that of the 1.6 million directly employed workers in PEZA-registered companies and enterprises, 1.1 million are already back at work. To date, 85% of PEZA locator companies are already operational.
Plaza said PEZA has also taken “strong and smart initiatives” to counter the consequences of the prolonged quarantines. “Mindful of strict health protocols to protect the health of our workers, there are shuttle services and dormitories were also provided to lessen their exposure to public transportation,” said Plaza.
PEZA also suspended effective March 17, 2020 the existing 30% limit on the total revenue on the work-from-home (WFH) arrangement. Under this scheme, a 90% limit on the total annual revenue on WFH arrangement shall be allowed until December 31, 2020.
Additionally, under PEZA Memorandum Circular No. 2020-011, the authority allows PEZA-registered enterprises to establish workspaces in non-PEZA registered sites.
