PEZA chief changes heart, now favors CITIRA bill

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After a long resistance, Trade Secretary Ramon Lopez says the head of the Philippine Economic Zone Authority now supports the passage of the bill that will cut short tax incentives granted to long-time investors.

Metro Manila (CNN Philippines, October 9) — Change has come at the helm of the Philippine Economic Zone Authority (PEZA) as the agency is now backing the passage of the tax reform law that will overhaul fiscal perks and cut short the incentives enjoyed by select investors.

Trade Secretary Ramon Lopez said that after a long disagreement, PEZA Director General Charito Plaza has had a change of heart towards the Corporate Income Tax and Incentives Reform (CITIRA) bill. This came after all 13 members of the PEZA Board voted for the measure.

"DG Plaza now supports CITIRA," Lopez said in a text message to CNN Philippines, saying she was made to see the "importance of reform."

"I told her this is mandated by President and that there are ongoing discussions to finetune provisions to address the concerns of stakeholders, especially locators," he added.

CITIRA, the second package after the Tax Reform Acceleration and Inclusion law, will trim the corporate income tax rate from 30 percent to 20 percent over 10 years, while reducing tax breaks for investors.

The bill would create a uniform tax incentive package for all kinds of investments, and limit how long businesses can enjoy tax discounts. The Department of Finance wants to cap incentives at seven years, while those enjoying tax breaks now will have to say goodbye to these perks soon.

Under the bill passed by the House of Representatives, firms that currently enjoy some form of tax breaks for more than 10 years can only keep the incentive for just two more years. Those that have enjoyed the reduced tax rate of 5 percent on gross income for five to 10 years can keep it for three years more, while those with perks for less than five years can still avail of the discounted rate for the next five years.

Plaza had been vocal against CITIRA prior to this turn of events, saying that locators in PEZA ecozones should be exempted from the incentives revamp. She had the support of the Joint Foreign Chambers, as these businessmen warn that changing incentives mid-game would scare investments away, push companies to relocate, and lead to job losses. As a result. Plaza had been at loggerheads with Finance Secretary Carlos Dominguez III, who has been aggressively pushing for the bill.

In a statement sent Wednesday afternoon, Lopez said he convened the special board meeting for PEZA to "emphasize the importance of the tax and incentives reform that we are pushing for, which has the mandate from our President and was approved by the Cabinet."

Lopez said he explained ongoing "refinements" to certain parts of the bill to address investor concerns.

"To have a smoother transition, current discussions are on the number of years in the sunset provision for existing locators, as well as extra years of income tax holiday and lower tax rates for new projects in strategic, high-technology industries with preference on locating in least developed areas," the DTI said.

Lopez said this assurance prompted Plaza to "officially align" her position on the CITIRA, and that she will no longer "ask for exemption" from the proposed law.

The DOF said it wants the CITIRA and other tax reform measures passed by Congress before the year ends.

Apart from the DTI, other agencies part of the PEZA Board are the DOF, the Department of Labor and Employment, the Department of the Interior and Local Government, the Department of Environment and Natural Resources, the Department of Agriculture, the Department of Public Works and Highways, the Department of Science and Technology, the Department of Energy, the National Economic and Development Authority, and representatives from the labor and business sectors.