DOF, PEZA set to clash over TRAIN 2 incentives

by Richmond Mercurio (The Philippine Star), Apr 13, 2018

MANILA, Philippines — The Department of Finance (DOF) and the Philippine Economic Zone Authority (PEZA) are bound to clash as the latter vowed to fight for the retention of the current set of incentives it is offering investors amid ongoing moves to rationalize fiscal perks.

PEZA director general Charito Plaza remains steadfast in protecting the interest of investors in line with ongoing discussions regarding the second tax reform package.

“Before, during TRAIN 1, I was asked to stop complaining because I am part of the government…to let the private sector complain. I said excuse me, please spare me because the industries are the ones that give us bread and butter. Our salary and everything comes from our investors’ fees, so we have to protect our investors. We have to protect our bread and butter,“ Plaza said in an interview Wednesday night during PEZA’s 23rd anniversary celebration.

“The government does not give us any subsidy for our salary, for our programs, for everything. In fact, 50 percent of our net profit we even remit it as dividends to the government. It is us, PEZA, who contributes to the government,” she added.

Plaza said PEZA is bent on pushing for a status quo of its incentives under the second tax reform package.

Because of uncertainty, the DOF’s proposed TRAIN 2 has become “a Sword of Damocles hanging over the heads of PEZA, the industries, and investors,” Plaza said.

She said incentives are the primary reason foreign industries are investing in the Philippines, and the possibility of removal under the second package has caused some companies to hold back on their new investment and expansion plans.

In fact, PEZA’s approved investment pledges declined 22 percent in the first two months of the year to P20.99 billion from P26.81 billion in the same period last year.

“Some are expanding, but slowly. But compare it to last year, compared to before TRAIN 2, there are a lot of existing companies expanding and a lot of new investments coming in. After TRAIN 1 wherein zero VAT and other incentives were retained, investors were happy. Then here comes TRAIN 2 and everyone starts holding back again,” Plaza said.

For Plaza, the way DOF is presenting how fiscal incentives were handed out in the past is “unfair and one-sided.“

She said computations from the DOF showed that the government gave away a total of P235.31 billion to PEZA companies in 2015 in the form of tax incentives.

“They should not look at the taxes foregone, but at the total development like income that these industries contributed to the economy and we should also look at the social progress that was created by these industries and ecozones. Like, the municipalities before are now cities. The poverty index, the crime index , the insurgencies were eradicated in these areas where there are economic zones and industries,” she said.

Plaza remains hopeful the DOF and President Duterte would listen to PEZA and the industries’ request for the retention of the current set of incentives.

“Well, the TRAIN 2 is already there. So we are crossing our fingers and we have high hopes in Congress because right now we get assurance from the senators and from members of Congress that they are going to support us,” Plaza said.

“We appeal anew to the President and Congress to seriously evaluate the effects of the proposed TRAIN 2 to our existing investors’ desire to expand and establish more branches nationwide. May I appeal to the government not to kill the goose that lays the golden eggs, our industries and investors who poured in huge capital investments and the sources of thousands of jobs created for our people,” she added.