Health crisis not the time to 'experiment' on tax perks — PEZA
MANILA, Philippines — As companies reel from the health crisis, now is not the time to “experiment” on the government’s tax incentives regime, the country’s largest economic zone operator said, opposing a state-backed stimulus plan that will see tax perks reduced over time.
“Now more than ever, we reiterate our position for status quo in order to give our registered enterprises an opportunity to recover from the COVID-19 crisis,” said Charito Plaza, director-general of the Philippine Economic Zone Authority (PEZA).
“This is not the time for the government to experiment on new fiscal incentives but rather to extend all the necessary assistance to all companies which are adversely affected by this pandemic,” Plaza said in a statement.
Plaza voiced out her opposition to the Executive-backed Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, primed by economic managers as one of its stimulus measures that would help the economy get back on its feet post-pandemic.
But once the dust settles, Plaza said CREATE would hardly encourage the private sector, battered by the coronavirus disease-2019 (COVID-19) outbreak, to funnel investments in the country. Worse, she said the bill can actually force firms to shut down, despite an outright 5% reduction from corporate income taxes once the law is enacted, supposedly meant to reduce company costs.
“We fear that instead of assisting enterprises struggling from the effects of the community quarantine due to COVID-19, the CREATE bill in its present form may actually cause companies to close their operations in the country…,” she explained.
“(T)he CREATE bill does not really offer a concrete economic stimulus to affected companies,” she said.
Strictly speaking, CREATE is still non-existent to date since the government’s plan is introduce the bill’s components to the Corporate Income Tax and Incentives Rationalization Act (CITIRA) measure pending now at the Senate.
Time is ticking for the bill however since Congress is set to adjourn its current session in June 5 until July 26. President Duterte may call for a special Congress session though if it means passing CREATE and Bayanihan II, another stimulus bill that extends Duterte’s power to tinker with the budget without legislators’ approval.
For Plaza, keeping the current tax breaks regime, in place since 1995, at this time ensures “stability and confidence” in the local investment climate, which in turn is sufficient to drive investments later. That said, should CREATE pushes through, Plaza appealed that the law be enforced first in domestic companies, not foreign firms some which PEZA is trying to attract.
As of February 2019, PEZA operated 396 economic zones nationwide, areas where tax holidays and other perks are used to entice investments.
“The incentives of PEZA are tried, proven, tested and globally competitive as shown by the track record of PEZA since its creation in 1995,” Plaza said.
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