THE Philippine Economic Zone Authority (Peza) has warned that locators may leave the country because of one of the items vetoed by President Rodrigo Duterte which may have a big effect on the country’s existing foreign direct investors.
This was the removal of the extension of availment of tax incentives by existing registered business enterprises (RBEs) given that the “extension of incentives for existing projects is unfair to ordinary taxpayers / unincentivized enterprises and further, only new activities and projects deserve fresh incentives.”
Under the Corporate Recovery and Tax Incentives for Enterprises (Create) Act, RBEs have no choice but to make do with the 10-year sunset period (after the lapse of income tax holiday) and thereafter, graduate to the regular 25 percent corporate income tax rate.
According to deputy director general for policy and planning Tereso Panga, the scenario could be a make or break for the Philippines as the affected ecozone locators, for example, might decide to retain their facilities and invest in new projects to be entitled to a longer income tax holiday and special corporate income tax period (total of 14 to 17 years).
Worse, they might just pack up and transfer to a more willing host-country that can offer better incentives for their investments as their availment of more advantageous incentives for sunk projects with the investment promotion agencies (IPAs) prior to the Create Law were cut short by the mandatory sunset period for RBEs, he added.