MANILA, Philippines – The Philippine Economic Zone Authority (PEZA) Board again hopes to delay the passage of the bill seeking to rationalize tax incentives, but this time over the crippling threat of the novel coronavirus.
At the Senate hearing on the virus’ economic impact on Monday, March 9, PEZA Director General Charito Plaza asked the chamber to “carefully study and delay” the discussion on the proposed Corporate Income Tax and Incentives Rationalization Act. Citira had just moved to the Senate plenary in February.
Plaza said that her position – from being against Citira to supporting it – was a few months ago when “the disasters are not yet happening.” She said PEZA had sent letters to “all senators” asking to delay Citira’s passage.
“Iba na po ang nangyayari ngayon. Ang aming pakiusap sa Senado, ‘wag muna natin i-railroad ang Citira (It’s a different situation now. That’s why we’re asking the Senate not to railroad Citira), but instead, carefully study it. Because our export industries, the clients of PEZA, are the most affected,” Plaza said.
“Katulad sa nangyari ngayon po (As what is happening now), 40% of importations or more of semiconductors and manufacturing groups are affected because of the closure of suppliers in China,” she added.
Dan Lachica, head of the Semiconductor and Electronics Industries in the Philippines Foundation, confirmed that at least 40% of Chinese importers have closed down, and if South Korean firms were to be counted, the total figure is at 53%.
“Just as global market demand has gone down, with travel bans, [these have] affected the movement of goods, import and export. So there is a delay in the delivery of exportation by the buyers of our industries and the lowering…of production quota of our industries,” Plaza said.
Socioeconomic Planning Undersecretary Rosemarie Edillon on Monday said that around 30,000 to 50,000 jobs in manufacturing and tourism would be lost due to the coronavirus.
Discussion on Citira
Within the economic team, Plaza was a staunch anti-Citira advocate and had long argued that Citira, if passed, would cause job losses.
Rumors of Plaza getting the axe then spread, as PEZA stood firm on its position. After “reconciliation,” Plaza agreed to support the bill.
But it seemed that with the coronavirus crisis, Plaza has found an opening. She told senators on Monday that fiscal incentives allow locators to be “globally competitive.”
In response, Finance Assistant Secretary Teresita Habitan said that if PEZA locators are indeed globally competitive, then why ask for incentives?
“We studied over 1,322 financial statements of locators and what it showed was the return of investment was very high even if they change the investment system,” Habitan told the Senate panel.
“If you compare this with the reduction in the corporate income tax rate, then fear of job losses may be indeed too pessimistic. We don’t see that there will be job losses arising from the change with the incentive,” Habitan added.
But Plaza said in closing, “Why fix when there is nothing broken?”
In his 4th State of the Nation Address in July 2019, President Rodrigo Duterte had urged Congress to prioritize Citira.
The counterpart measure at the House was passed in September 2019. – Rappler.com
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