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The logos of the different foreign chambers of commerce making up the Join Foreign Chambers of the Philippines (JFC). (Background photo: Jon Manosca via Flickr)

JFC urges status quo on PEZA VAT perks

By Riza Lozada

The Joint Foreign Chambers of the Philippines (JFC) is seeking a status quo on the exemption of locators in Philippine Economic Zone Authority (PEZA) from the 12-percent value added tax (VAT).

In a statement, JFC said should long-committed investors be placed under a VAT refund scheme, this would harm attracting investments in the country since it will be an additional cost of doing business and it is also seen to create red tape.

“In order to maintain and to expand foreign investments in PEZA zones, the incentive structure must be attractive in comparison to what competing countries offer in fiscal incentives, labor incentives, electricity and logistics pricing, number of paid holidays, and other costs,” JFC stated.

The JFC is composed of American Chamber of Commerce of the Philippines, Australia New Zealand Chamber of Commerce of the Philippines, Canadian Chamber of Commerce of the Philippines, European Chamber of Commerce of the Philippines, Japanese Chamber of Commerce of the Philippines, Korean Chamber of Commerce of the Philippines, Information Technology and Business Process Association of the Philippines, and Semiconductor and Electronics Industries of the Philippines Foundation, Inc.

The business group noted that some investors are delaying its investment decisions in the Philippines or opt to invest in other countries due to uncertainties that may be brought by the Tax Reform for Acceleration and Inclusion (TRAIN) bill.

JFC said in its statement that foreign investors would prefer a zero-rated VAT scheme rather than seeking refund because the government has a poor record under the scheme.

During the plenary discussion on TRAIN bill in the Senate, Senator Juan Edgardo Angara revealed that the government has current pending payment of around P30 billion as refund.

“Foreign investors would prefer not to have any refund arrangement for zero-rated firms, as this would be consistent with President Duterte’s policy of making doing business in the Philippines easier and support an improvement in country’s rating in the Global Competitive Index of the World Economic Forum,” the JFC said.

Moreover, the JFC stressed that retaining the zero VAT provisions for PEZA locators in the Senate Bill 1592 or the TRAIN bill is crucial to both investors and the investment promotion agency.

PEZA houses over 3,500 investors in more than 350 economic zones nationwide.

Big investors in PEZA are from the electronics sector and information technology (IT) parks developer, which support the IT and business process outsourcing (ITBPO) industry in the country.

Both electronics and ITBPO industries are growth driver of the country’s export revenues.

Investment approvals of PEZA in the first three quarters reached P196.46 billion, up 94 percent from P101.20 billion in the same period in 2016.

PEZA Director General Charito Plaza said developments of new economic zones have driven the increase in investment approvals in January to September 2017 period.

Plaza said the top economic zone developer in the first nine months of the year was First Pangasinan Property Development, a joint venture of Filipino, Taiwanese, Chinese, and Singaporean companies.

Its initial project is the development of a 400-hectare economic zone in Dasol, Pangasinan amounting to P20.79 billion, the PEZA chief said.

She said the P20.79-billion investment is part of the over P18-trillion total planned investments of companies which Chinese businessman You Hao Chen initiated to come to the Philippines.

Plaza noted that registration of manufacturing projects also backed the growth in investment approvals in PEZA for the first nine month of the year.

Investment pledges in PEZA remained strong from January to September this year despite the number of projects declined by 2.01 percent year-to-date.

Number of projects registered in PEZA in the first three quarters of the year decreased to 438 projects from 447 projects last year.

As of end-July 2017, total job generation in PEZA improved by 6.12 percent to 1.36 million from 1.28 million at end-July 2017.

Likewise, export revenues of PEZA-registered enterprises rose 11.47 percent to USD29.26 billion at end-July this year from $26.25 billion in the same period last year.

Meanwhile, Plaza has been leading PEZA for more than a year since the Duterte administration took office in 2016. She started as PEZA chief on Oct. 5, 2016.

In her first 365 days as PEZA chief, investment approvals in PEZA from Oct. 5 last year to Oct. 4 this year reached P313.4 billion.

The amount was higher than the record-high investment approvals of PEZA in 2012 amounting to P311.9 billion.

“PEZA is very aggressive in its marketing and promotions,” Plaza said.

“We conducted briefings, dialogues with local government units, big and private land owners, telling everybody to make their land properties become economic zones. Our goal is to have no idle lands,” she added.

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