By Bernie Cahiles-Magkilat
The government’s second comprehensive tax reform program (CTRP), which centers on replacing the juicy incentive packages for export-oriented investors located in economic zones, has caused a serious rift between Trade and Industry Secretary Ramon M. Lopez and Philippine Economic Zone Authority Director-General Charito B. Plaza.
Lopez is chairman of PEZA, which is attached to the DTI. In the hierarchy of things, the DTI Secretary should be Plaza’s boss. But the former Go Negosyo stalwart does not see eye to eye with the Brigadier General who holds the fort at PEZA.
The rift stemmed from the second CTRP, which would overhaul the PEZA incentive scheme as proposed by the Department of Finance. Lopez has aligned himself with the government/DOF position to rationalize the incentives system, but Plaza stood her ground against it.
As the PEZA incentive packages are put at risk under the second CRTP package, which is carried under the current Corporate Income Tax and Incentives Rationalization Act (CITIRA) Bill, a replacement of the old TRABAHO Bill filed in the previous Congress, Plaza has pushed for the amendment of the PEZA Charter to strengthen the agency’s authority over its menu of tax perks to its locators.
PEZA would also detach them from DTI and directly under the Office of the President. Three measures (House Bills 3654, 3747 and 3897) have already been filed to amend the roles and functions of the agency.
Now, both officials are accusing of being bypassed by each other. Lopez said he was bypassed by Plaza and the PEZA Board did not endorse the Director-General’s action.
“The DTI Secretary was not bypassed as he was aware earlier of the proposed PEZA law amendment. It was, he, who bypassed PEZA and its registered-industries by not supporting the ‘tried and tested incentives of the agency’, which are backed by the industry associations and locators. This is contrary to the expected behavior of a PEZA Board chair who should supposedly listen and support the concerns of its investors and locators,” Plaza said in a statement.
According to Plaza, the DTI chief has been informed of the PEZA plan to amend the 24-year-old PEZA Law, which Plaza authored when she was still a congresswoman. The proposed charter changes were also discussed in the PEZA Board meetings where DTI is represented, and in several consultation-dialogues with partner ecozone industries, foreign chambers and business associations.
Starting July 2019, PEZA’s proposed amendment to its charter, called Republic Act No. 7916 otherwise known as Special Economic Zone Act of 1995, was submitted to the House of Representatives and filed by lawmakers in the 18th Congress as House Bill 3654, 3747, and 3897. Plaza said the sponsor legislators also support the exemption of PEZA from the ongoing discussion of CITIRA Bill, which if passed, will reduce corporate income tax to 20 percent by 2029, from 30 percent at present in lieu of the removal of the incentives, including the much coveted 5 percent gross income tax earned, granted to economic zone firms.