TIEZA hopeful of DOF support on incentives to tourism zones

MANILA, Philippines — The Tourism Infrastructure and Enterprise Zone Authority (TIEZA) is optimistic the Department of Finance (DOF) will support its grant of incentives to tourism enterprise zones (TEZs).

In an interview, TIEZA chief operating officer Pocholo Paragas said they have written the DOF expressing their support of the Tax Reform for Acceleration and Inclusion (TRAIN) Law and the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill, but emphasizing the need to add tourism as a major point of income generation for the country.

“I think right now, we’re getting a lot of traction with them because at the end of the day we’re looking at a sunrise industry, tourism is that,” Paragas said.

He said that it is acknowledged worldwide that tourism is one of the industries that countries should bank on.

In 2017, the tourism sector accounted for 12.2 percent of the country’s economy, the Philippine Statistics Authority (PSA) reported. 

Finance Secretary Carlos Dominguez earlier said the DOF is not keen on extending the sunset period for the grant of incentives for TEZ, which will lapse next year.

He said the DOF would oppose any proposal to extend the sunset provision under Republic Act 9593 or the Tourism Act of 2009, which provides incentives to tourism zones identified by TIEZA.

This is despite the six-year delay in the implementation of the law.

Last year, the Bureau of Internal Revenue (BIR) clarified that the incentives for TEZ under Republic Act 9593 may be enjoyed by investors even beyond 2019 until these incentives are fully realized.

In the event that this sunset period does not get extended, Paragas said the agency would need to do a paradigm shift.

“Personally, in terms of tourism...even without the incentives, an enterprise zone is a very good place to bank on,” Paragas said.

Paragas emphasized that TEZs offer locators more inclusive development and better protected utilities as it offers centralized development.

He emphasized that this is also a way of developing sustainable tourism in the country.

Under RA  9593, TEZ developers and tourism enterprises will be granted a six-year income tax holiday that may be extended for another six years, a five percent preferential tax on gross income in lieu of national taxes except for real property tax and fees of TIEZA, a  net operating loss carry over scheme, import tax exemptions for capital goods and equipment needed for TIEZA-registered activities, and import tax exemptions for transport equipment and spare parts needed for TIEZA-registered activities.

They will also be exempted from value-added tax and excise tax goods imported by TIEZA-registered activities, tax credit equivalent to taxes paid on locally sourced goods, and tax deduction of up to 50 percent of cost of environmental protection and cultural heritage preservation activities as well as of sustainable livelihood programs of the registered tourism enterprises.

Colliers International Philippines research manager Joey Roi Bondoc earlier told The STAR that the non-extension of incentives to TEZs is seen to put a dent in the competitiveness of the tourism sector.

“For us, it’s similar from what we see in the office (sector) from the PEZA (Philippine Economic Zone Authority) locators. That will definitely have a dent in the flow of tourism investments here,” Bondoc said.

Based on the 2017 Travel and Tourism Competitiveness report by the World Economic Forum (WEF), the Philippines slipped to 79th place, five spots lower than its ranking in 2015.

The report said there are several categories where the Philippines needs to improve substantially, such as in safety and security category, where the country ranks 126th.

Bondoc earlier said an improvement in the tourism sector’s competitiveness is needed to be able to attract more hotel and tourism-related investments.

“Generally the country’s travel and tourism competitiveness should improve. If this happens we attract more foreign tourists, including the high spenders,” he said.

He said there are three major areas where the country should improve to attract more leisure investments, and these include safety and security, infrastructure, and ease of doing business.