Over a thousand companies inside special export processing zones (EPZs) will undergo a fiscal incentives review after the Department of Finance (DOF) found the incentives system being abused, Finance Secretary Benjamin Diokno said on Tuesday, May 30.
Finance Secretary Benjamin Diokno at the Palace press briefing on Tuesday, May 30. (RTVM screenshot)
During a media briefing in Malacañang, the official lamented how companies inside these special economic zones are abusing the tax incentives being provided by the government to attract foreign investments.
Diokno stressed the need “to put order" on such system.
The Finance secretary explained that these zones are “usually used by countries to attact foreign investors.”
“Kasi 'pag nag-locate ka sa EPZA (Because when you are located in EPZA), then you cut the bureaucracy,” he said, adding that companies also have an easier time securing permits.
“An kaso sa atin naabuso iyong concept ng EPZA. Kasi alam nyo may mga buildings sa Makati EPZA sila, ‘yung category (However, here, we abused the concept of EPZA. Because you know there are buildings in Makati categorized as EPZA),” the official stated.
Companies that want to avail of the incentives must now go through the Fiscal Incentives Review Board, an office under the DOF that Diokno himself co-chairs.
The Department of Budget and Management (DBM), National Economic and Development Authority (NEDA), and Office of the President (OP) are members.
The review office would handle “more than P2 billion worth of investments”, which is the “cut off,” the secretary explained.
But those with smaller investments can go straight to the export processing zones or the Board of Investments (BOI).
“So, iyon ang bagong system ngayon na (So, that’s the new system now that) we have better handle of the amount of money we are giving away in terms of incentives,” Diokno explained.
He added that the review would cover “thousands of firms” that are “located right now in many EPZAs and there are no investments coming in.”
Companies inside these economic zones enjoy fiscal and non-fiscal incentives, such as income tax holidays, enhanced deductions, tax- and duty-free importation of capital equipment, raw materials, spare parts, or accessories, domestic sales allowance, value-added tax- (VAT) exemptions, long-term land lease, employment of foreign nationals, and exemptions from paying national and local government taxes and fees, among others.