Tax perks are earned – PEZA
Credit to Author: ANNA LEAH E. GONZALES| Date: Tue, 20 Aug 2019 16:23:01 +0000
The Philippine Economic Zone Authority (PEZA) on Tuesday clarified that conditions are imposed for firms to enjoy the incentives such as Gross Income Earned (GIE), zero value-added tax (VAT) rating for local purchases, and tax and duty free importation.
“PEZA incentives are not given to companies, enterprises, locators or ecozone developers per se, but incentives for export-based industries are for those who are able to upgrade their products, activities, expand their projects and markets, and those who can bring technology-transfer in the Philippines,” PEZA Director General Charito B. Plaza said in a statement.
“Hence, PEZA incentives are performance-based from the beginning, not an afterthought. It aims to motivate and encourage companies to upgrade, grow, and perform. PEZA has validation process for this in order for locators and companies to avail of tax incentives,” added Plaza.
To recall, the Department of Finance earlier said the government posted an estimated P1.12 trillion of foregone revenues in tax perks from 2015 to 2017.
It added that PEZA gave away P879.1 billion of tax incentives during the said period.
Plaza said PEZA only gives incentives to products that are in demand in the market.
“In other words, incentives are not forever enjoyed by companies which fail to innovate and expand, thus, they lose the world buyers and close shop,” she said.
Plaza said that under the Implementing Rules and Regulations of Republic Act 7916 or “The Special Economic Zone Act of 1995,” PEZA may suspend, withhold, disapprove or revoke import or export permits, authority to engage in local sale, to avail of any incentive or privilege being administered by the agency for failure of companies to comply with the rules and regulations governing the incentives.
She said PEZA-registered companies are also required to strictly adhere to deadlines on fiscal and performance reports, in order to avail and enjoy the PEZA incentives.
Upon implementation of RA 10708 or the “Tax Incentives Management and Transparency Act” (Timta) or since 2015, companies are also required to submit reports pertaining to the law.
Aside from the standard reports required by PEZA, enterprises are also required to submit reports under Timta, which PEZA consolidates and submits to the Bureau of Internal Revenue and the National Economic Development Authority.
The reports include the incentives availed by the PEZA enterprises and other data pertaining to the operations of PEZA enterprises such as investments, taxes paid and employment generated, among others.
Plaza said one PEZA tax perk which is time-bound is the Income Tax Holiday Incentive which, she said, is performance/investment-based and time-bound because pioneer projects enjoy 6 to 8 years, while non-pioneer projects are given 4 to 6 years of ITH.
Amid calls to rationalize fiscal incentives, Plaza warned that revamping the tax perks will weaken investors’ trust and confidence.
In the proposed second Comprehensive Tax Reform Program (CTRP), the 5 percent tax on gross income earned (GIE) paid by ecozone developers, operators, and enterprises or locators in lieu of all local and national taxes will be removed.
“The GIE is one of the highlight incentives attracting investors, so it is very crucial because revenues paid to national and local government are deducted outright from the gross income of companies. It means that government has more to earn from the GIE and is secured of its revenues therefrom,” she said.
Plaza said the GIE is also significant for facilitating ease of doing business.
“However, the removal of the GIE, as proposed by CTRP, would be a possible ground for corruption, leakages, and inconvenience because investors would have to deal with various levels of bureaucracy,” said Plaza.