Economic zone locators found relief after the Department of Finance and the Bureau of Internal Revenue temporarily deferred the collection of value added tax on local purchases of exporting companies.
Philippine Economic Zone Authority director-general Charito Plaza said the BIR was advised to defer the implementation of Revenue Regulation 9-2021 that subjects all local purchases of economic zone locators to 12-percent VAT.
“The PEZA management appealed first for the deferment of the VAT RR which is very untimely as we’re still struggling to survive in this pandemic. We’ve been providing business assistance and reliefs and trying to keep operational our locators just to keep the jobs and livelihood of our people. Simultaneously, we protect the health of our 1.6 million ecozone and industry workers to keep investors from going to other countries,” she said.
Plaza said the DOF in its recent meeting committed to look for means to ease the transition to a VAT regime.
She said PEZA would continue to push for the repeal of RR 9-2021 to give the necessary support to companies that were barely recovering from the pandemic.
“It’s our ecozone and export locators and domestic suppliers who keep our economy afloat, while majority of the domestic enterprises were locked down. PEZA’s balancing acts and incentives kept the trust and confidence of our investors,” she said.
PEZA said as of the second quarter, 98 percent of its locators were operating at varying capacity levels despite the frequent shifting of quarantine protocols, while all economic zones continued to be COVID-free.
PEZA said the business environment in economic zones was instrumental in increasing investments by 54 percent from 2020. Employment also grew by 3 percent to 5 percent from 1.6 million direct jobs while exports climbed 20 percent this year.
“We want to be assured not just of the deferment but continuity of the zero vat incentives provided to ‘separate customs territory’ as stated in the PEZA law. This practice is a similar incentive to the world’s economic zones and free port zones and thus makes us globally competitive,” Plaza said.
PEZA earlier said it may lose at least P33 billion worth of big ticket investments if the government would force the collection of 12 percent VAT from otherwise zero VAT rated activities prior to RR 9-2021.
Finance Secretary Carlos Dominguez III said earlier fiscal incentives enjoyed by favored enterprises cost the government P481.7 billion in foregone revenues in 2019, or a year before the landmark congressional approval of the law that finally introduced bold reforms in the corporate income tax system.
The Department of Finance said the amount was given away by various investment promotion agencies and through fiscal incentives. The agency expects future fiscal and non-fiscal incentives to be rationalized to ensure they are performance-based, targeted, time-bound, and transparent, following the enactment of the Corporate Recovery and Tax Incentives for Enterprises Law in March.