FINANCE
Secretary Cesar Purisima wants to limit the fiscal incentives given to foreign
investors and stop the perks enjoyed by domestic companies.
This is in line with the Aquino
administration’s rationalization of the fiscal incentives being given to
investors that the DOF believes is hurting the revenue stream of the
government.
“We have this fiscal rationalization that’s
now pending in Congress. It’s a bill that’s already in the Senate, but there
are several things that we want to push,” Purisima said.
He said the government should put a limit, or
a “sunset provision” to the fiscal incentives since the Philippine Economic
Zone Authority (Peza) just renews such tax perks.
“Our thinking is that maybe there should be a
limit [to giving out fiscal incentives] with the possibility for renewal, in
case it’s necessary,” he said.
Peza is an attached agency of the Department
of Trade and Industry. It is in charge of promoting investments, extending
assistance, registering, and most of all, granting incentives to and
facilitating the business operations of investors in export-oriented
manufacturing and service facilities.
Purisima, who was also secretary of the DTI
during the Arroyo administration, also wants to remove all the tax perks for
domestic companies and limit such to export-oriented firms.
If the government wants to support domestic
firms, the DOF prefers to hand out subsidies, such as tax credits “because they
are more readily measurable; it’s in the budget, and it’s something that you’ve
got every year.”
Peza has around 15 agro-industrial economic
zones, 159 information-technology parks or centers, 64 manufacturing economic
zones, two medical-tourism parks and 12 tourism economic zones.
The DTI, through the Board of Investments
(BOI), every year prepares its Investment Priorities Plan, which provides for
the “sunset provision” for income-tax holiday entitlement of certain firms
belonging to various industries.
Such sunset provision is, however, applicable
only to BOI investors and not to Peza.
Peza locators are entitled to 100-percent
exemption from corporate-income tax for the first four to six years of
operation. The tax perk can be extended by three years more or a total of eight
years should the company decide to expand its operations in the country.
Upon the expiration of the tax holiday, Peza
locators that are mainly export-oriented are only obliged to pay 5-percent
special tax on gross income, and are exempt from all national and local taxes.
The firms are also entitled to value-added tax-zero rating, and are tax- and
duty-free for the importation of equipment and parts.
Peza investors are also exempt from paying the
expanded withholding tax being imposed on domestic and foreign corporations for
transactions with clients and customers.
Purisima also wants to rationalize the
incentive-giving bodies, since “they’re simply too many.”
“Our thinking is that the Peza can be
converted into an incentive-granting body, but no promotional roles, and the
BOI can be purely promotional, so that there is no built-in conflict,” he said.
VG CABUAG
Business Mirror
Business & Investment Opportunities
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