CITIRA Tax Reforms Push PEZA to Appeal for Exemptions
The Philippine Economic Zone Authority (PEZA) requested for their exclusion from the CITIRA Bill, also known as House Bill (HB) No. 4157″ or the “Corporate Income Tax and Incentives Reform Act”. PEZA Director Charito Plaza believes that the proposed changes would reduce the Corporate Income Tax (CIT) rate of the country to 20% compared from today’s 30%.
Plaza explained that domestic enterprises should first test the CITIRA bill before its application to exporters. They also request for economic zone exporters to keep their tax incentives even after the passage of the proposed measure. The CITIRA bill will rationalize the fiscal incentives of the investment promotion agency (IPA).
“What we can give in to only is to exempt PEZA. That’s it, and test (the CITIRA bill) first to the domestic enterprises, not to the exporters, because we have to take advantage of the opportunities and we have to maintain the globally competitive incentives that our industries are (receiving),” Plaza said.
Plaza insisted on taking certain situations to their advantage as they can attract new investments or those transferring from one country to the Philippines rather than changing the incentives, which may cause instability.
“Instead of trying to change (PEZA) incentives and causing instability, Philippines should seize the opportunity to take advantage of the US-China trade war, the Hong Kong turmoil and GSP (Generalized Scheme of Preferences) plus zero-tariff privilege, which are opportunities for us to attract new and transferring investments toward our country,” she stressed.
Government Should Check CITIRA’s Effects to the Economy First
The CITIRA bill, formerly known as the Tax Reform for Attracting Better and High-Quality Opportunities bill (TRABAHO) will also amend Republic Act No. 7916, or also known as the Special Economic Zone Act. It will increase the Gross Income Earned (GIE) from 5% to 7%.
President Rodrigo Roa Duterte identified the CITIRA bill as a priority measure which the 18th congress should pass as soon as possible. As of this writing, the corporate tax reform bill received approval on its 2nd reading last September 9, 2019.
“We are not the only game in town. Philippine economic zones are competing with other countries or with far more developed and high-tech ecozones. Congress should be careful about ‘follow CITIRA or leave Philippines’ attitude as investments are crucial for employment, exports, and economic growth,” Plaza said.
The IPA is not willing to settle with the government’s plans to rationalize the tax incentives as it may disrupt the Philippines’ competitiveness in the global economy and is a “dangerous compromise.”
“We want our investors to feel confident that when they invest, when they bring their huge capital here, the rules will not be changed,” Plaza said.
“That’s their impression. Every time we change our administration, we change our policies and laws as well. We have to put it in the PEZA law amendments, to institutionalize, to stabilize our incentives,” the PEZA Director added.