The National Economic and Development Authority (NEDA) said registered business enterprises (RBEs) located in the economic zones of various investment promotion agencies (IPAs) led by the Philippine Economic Zone Authority (PEZA) have strong contributions to the domestic economy in terms of investments, exports and jobs, among others.
“The projects of the RBEs have contributed to the domestic economy through investments, employment generated, exports and domestic sales,” said the NEDA study.
This was highlighted by NEDA in the cost benefit analysis (CBA) it conducted on RBEs that received tax incentives. The CBA showed how the economy has benefited from the tax incentives granted to RBEs. The study, which was also in compliance with the provisions to the Tax Incentives Management and Transparency Act, was presented during the Senate hearing on the Corporate Recovery and Tax Incentives for Enterprises bill.
In terms of investments, NEDA said that total stockholders equity by the 1,687 RBEs, mostly from the Philippine Economic Zone Authority (PEZA), covered in the survey amounted to P784.16 billion in 2016, P934 billion in 2017, and P921.92 billion in 2018. The study explained that this amount roughly represents 5.4 percent, 5.3 percent and 5.71 percent of total market capitalization o the Philippine Stock Market during the years 2016, 2017 and 2018, respectively.
“This implies a high capital intensity, considering that there were only 1,687 respondent RBEs,” NEDA said.
Stockholders equity represents retained earnings that serve as additional resources for expansion or reinvestment, which add to the country’s capital stock.
NEDA also said that the stockholders equity for the three-year period coincided with the data on net equity foreign direct investments where a decline of 31 percent was recorded in 2018 from a higher growth rates in 2016 (42.7%) and 2017 (31.1%). Growth of total reinvestment of earnings also decelerated to 3.9 percent in 2018 from a high of 21.5 percent in 2017.
The NEDA data also showed that 691 RBEs out of 1,687 RBEs have claimed tax incentives in 2016. This number increased to 757 and 809 claimants in 2017 and 2018, respectively. The total tax incentives claimed for the taxable years 2016 to 2018, based on RBE submissions, range from P43.4 billion to P51.67 billion. This is equivalent to 18.6 percent, 17.5 percent and 17 percent of the corporate income tax recorded in 2016-2018, respectively.
The total CIT collection of the Bureau of Internal Revenue amounted to P232.79 billion in 2016, P257.64 billion in 2017, and P302.98 billion in 2018.
Of the 8 IPAs, PEZA RBEs have accounted for the bulk of the tax incentives claimed at 42.5 percent in 2016 to 43.90 percent in 2017 and 50.30 percent in 2018.
In terms of jobs, the RBEs generated about 176,266 employment opportunities in 2016 although this declined to 143,779 in 2017 and a higher 165,423 in 2018.
Wages paid by the RBEs also amounted to P261.87 billion in 2016 and grew higher to P289.79 billion in 2017 and further to P311.36 billion in 2018.
In terms of exports, NEDA said that 94 percent of all the country’s exports over the three-year period were contributed by PEZA RBEs.
NEDA also noted that considering that PEZA’s function is primarily to promote exports, and in fact required to export 70 percent of their production, the data suggests that 89 percent of the total sales of RBEs in PEZA zones were exported on average over the three year period covered by the study.
Other IPAs in the study include Board of Investments, Bases Conversion Development Authority, Subic Bay Metropolitan Authority, Cagayan Economic Zone Authority, Zamboanga City Special Economic Zone Authority, Authority of the Freeport Area of Bataan, Tourism Infrastructure and Enterprises Authority, among others.