Finance warns against new ecozones

The Finance Department has strongly opposed the establishment of more special economic zones in different parts of the country, saying they could worsen the government’s deteriorating fiscal condition.

Finance said pending bills at the House of Representatives seeking to create the special economic zones could result in foregone revenue collections of close to P90 billion for the government.

It added that the government stood to lose P3 billion in revenues for each bill resulting in the creation of more special ecozones.

Congress on third reading has passed five bills calling for the creation of ecozones in Bataan, Ilocos Sur, Cebu, Davao Oriental and Samal Island.

Meanwhile, 12 bills seeking to establish ecozones in San Jose del Monte City, Pasqui and Burgos in Ilocos Norte, Bacolod, Iloilo, Romblon, Southern Palawan, Ilocos Norte, Negros Occidental, General Santos, Davao, Misamis Occidental, and Southern Leyte were approved in the committee level.

Twelve more bills calling for the creation of ecozones are also pending before various Congress committees.

The bills, according to records, seek to provide incentives to locators in these ecozones, including income tax holiday, net operating loss carry over, imposition of 5-percent tax on gross income earned, zero value- added tax and import duty on purchase of equipment and raw materials and other tax perks.

The Finance Department said it was not supporting the proposed creation of more ecozones in the country since the tax incentives would further erode government revenues.

“The tax incentives are too generous, among others, 20-year extendible grant of income tax holiday, and granting such would only diminish government revenues and would run counter with ensuring long-term fiscal sustainability,” it added.

It said the proposals also deviated from the intent of rationalizing and harmonizing the grant of fiscal incentives.

The department said the creation of separate authorities or corporate entities to manage the proposed ecozones would be a duplication of the functions of the state-run Philippine Economic Zone Authority.

Peza data show that 118 information technology parks or centers, 64 manufacturing and nine tourism ecozones, two medical parks and two agro-industrial centers operate across the Philippines.

Peza said there were 83 other proclaimed ecozones being developed in different parts of the country.

Finance Secretary Margarito Teves earlier appealed to legislators to impose a moratorium on the passage of revenue-losing measures due to the country’s deteriorating fiscal condition.

The Philippines is staring at a budget deficit of P250 billion, or 3.2 percent of gross domestic products this year, from P68.1 billion last year as it expects the GDP growth to slacken between 0.8 percent and 1.8 percent from 3.8 percent due to the global economic slump. –Lawrence Agcaoili, Manila Standard Today