PEZA reasserts proposal on longer 15-year CITIRA transition period

MANILA, Philippines — More than a month after the Philippine Economic Zone Authority (PEZA) board decided to support the Corporate Income Tax and Incentives Reform Act (CITIRA) bill, the investment promotion agency is now proposing to implement the grandfather rule and extend the transition period to 15 years.

PEZA director general Charito Plaza said the agency is proposing the  implementation of the grandfather rule and for the transition period to be extended for 15 years for the CITIRA bill.

The proposed measure, which has been approved on third and final reading at the House of Representatives, seeks to gradually reduce the corporate income tax rate to 20 percent from 30 percent, and rationalize fiscal incentives.

Among the proposed changes in incentives under the CITIRA is to remove the five percent tax on gross income earned (GIE) firms registered with the PEZA in lieu of all national and local taxes after their income tax holidays are used.

CITIRA provides a two to five year transition period for firms, depending on how long they have been paying the GIE.

Plaza said the recommendations are based on consultations PEZA conducted over the last month with groups such as the Philippine Ecozones Association, Semiconductor and Electronics Industries in the Philippines Foundation Inc., Information Technology and Business Process Association of the Philippines, Confederation of Wearable Exporters of the Philippines, as well as the Joint Foreign Chambers.

“While the agency supports the goals of CITIRA bill, PEZA aims to address the possible exits of foreign investors in the country’s ecozones towards other countries as this will result in massive job losses for thousands of Filipino, thus affecting peace and prosperity in the country,” Plaza said.

During a PEZA board meeting held last Oct. 9, the board reached a decision to support the CITIRA bill.

Plaza said then an agreement was reached as other agencies have expressed openness to fine-tune some features of the bill.

Prior to that board meeting, Plaza was vocal in opposing the proposed measure.

In particular, Plaza said she wants PEZA to be excluded from the CITIRA bill.

She also said earlier, she wants to keep the GIE regime, but raise the rate to seven percent, noting this is among the considerations of investors as it makes it easier for ecozone locators to make tax payments and such system removes the possibility of corruption and leakages with the share of the local government and national government remitted directly.

“With the recommendations and inputs of the affected parties under PEZA, we have now come up with our proposed refinements to better craft a beautiful legislation that’s beneficial for all,” Plaza said.

The Department of Trade and Industry (DTI), however, said it is sticking with its stand to push for a five to 10-year transition period under the proposed CITIRA.

Trade Secretary Ramon Lopez said the DTI and PEZA board have already submitted their position to push for a five to 10-year transition period on the CITIRA bill to the Senate.

As such, he said there is no need to meet with Plaza to again to discuss their position even as the latter is proposing for the grandfather rule and a 15-year transition period for the CITIRA bill.

“That is not what we discussed in the board. She (Plaza) is speaking for herself again,” he said.