PEZA: TRABAHO bill causes investment decline in 2018

MANILA, Philippines — The Philippine Economic Zone Authority (PEZA) has blamed a pending bill in Congress that seeks to tighten the fiscal incentives granted to investors operating in economic zones for the sharp decline in its total investments in 2018.

Based on the Commission on Audit’s (COA) annual audit report on PEZA, the state firm only generated P140.242 billion in investments last year, 41 percent or P97.328 billion lower than the P237.570 billion posted in 2017.

“On the immense decrease in investments, (PEZA) management commented that TRAIN 2 or the TRABAHO bill was the sole and only reason why PEZA’s investments took an immense beating in 2018,” the COA report said.

The proposed Tax Reform for Attracting Better and Higher Quality Opportunities (TRABAHO) bill, is the second part of the government’s Comprehensive Tax Reform Program.

The proposed bill seeks to lower the country’s corporate income tax (CIT) rate to 25 percent from the current 30 percent, while putting a cap on the grant of fiscal incentives to investors operating in economic zones to a maximum of five years.

“Efficiency-seeking investments like those investments that go to PEZA will not put their investment where there is uncertainty,” PEZA explained in a comment incorporated in the audit report.

The TRABAHO bill was approved on third and final reading at the House of Representatives during the 17th Congress, but the Senate failed to pass a counterpart measure. Thus, the bill would have to be re-filed by both chambers in the upcoming 18th Congress set to open July 22.

The PEZA said it has been consistent, together will all its industry partners, in opposing the proposed measure, explaining to the lawmakers that the bill would have “serious effects on PEZA investment, employment and export.”

“As pointed out to them (lawmakers), the mere fact that there was a serious attempt through the bill to change the incentive regime in PEZA, already scared away PEZA investors in 2018 even if the bill was not yet enacted into law,” PEZA said.

Based on the COA’s figures, PEZA has exceeded its target investments for 2018 by 4.97 percent, but only because the target was lowered to P132 billion from P229 billion in 2017.

COA’s records also showed that PEZA’s income from exports also declined by 3.14 percent to $49.736 billion in 2018 from $51.349 billion in 2017. PEZA’s export performance in 2018 fell short by 7.14 percent of its target of $53.410 billion for the year, the COA report showed.

On the other hand, the audit body commended PEZA for generating 88,256 additional jobs in 2018.

Based on records, PEZA generated a total of 1,506,088 jobs in 2018, higher by 6.22 percent than 1,417,832 jobs generated in the previous year.

The COA also commended PEZA for approving last year 55 ecozone developer projects with committed investments of P68.14 billion. The audit body also noted that nine newly proclaimed ecozones have already started commercial operations in 2018.

“Growth in employment, exports and investments are PEZA’s major concerns and the factors that determine its success, performance and achievement,” the COA report read.