With pledges up, PEZA says investors left 'either' unfazed or worried by CREATE
MANILA, Philippines — Investments in Philippine economic zones rose in the first quarter just as a bill cutting tax incentives was enacted. Did investors scramble to lock in perks before the measure is enforced or are they simply unfazed by the law? Regulators said “either” of the two could be true.
The Philippine Economic Zone Authority (PEZA) has long been at the forefront of the fight against rationalizing fiscal incentives that lure inflows to 534 ecozones that it oversees. That fight had already been lost with the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act passed last March.
Observers are now watching out for CREATE’s impact, not only on whether corporate tax cuts would trickle down to more hiring and business activities, but also if investors would buy economic managers’ position of a level playing field, at pandemic’s time, or prove PEZA’s qualms all along.
“Whether or not this was affected by CREATE, we would have to wait for the IRR (implementing rules and regulations),” PEZA director-general Charito Plaza said in a phone interview on Wednesday.
At the onset however, things are looking up for PEZA this year. From January to March, investments approved by the ecozone manager shot up 53.9% year-on-year to P25.38 billion. Funds, in turn, would finance 57 approved projects for exports, IT, logistics, tourism and other facilities.
Apart from investments, targeted to reach over P100 billion this year, PEZA said its 3-month exports also went up 15.6% year-on-year to $14.93 million. Employment, as a result of more ecozone activity, also inched up to 1.58 million from 1.54 million previously.
On face value, all these positive figures appeared to belie PEZA’s claims while CREATE was being debated in Congress. But it could also be that worried investors have moved to quickly secure tax perks as they stand now just before CREATE rules can be enforced. Plaza declined to speculate.
“Either. We will see the impact of CREATE in succeeding reports,” she said.
Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, agreed with Plaza, but added in an online exchange that with a broad reform like CREATE, “all the possible kinks and problems should already been taken into consideration.”
As it is, CREATE was the product of a hard fought battle for over two decades by the finance department that consistently argued against what it deemed as too generous perks resulting into a gaping revenue leakage. PEZA, meanwhile, had repeatedly countered this by saying that what’s lost in revenue terms is offset by billions in investments.
Last year, when the pandemic put investors on the sidelines, investments to PEZA plummeted to a 14-year-low of P95.03 billion. Yet even before the health crisis, uncertainties fanned by CREATE, that went with other names like TRABAHO and TRAIN 2, were already blamed for a 3 consecutive years of decline in inflows.
Since then however, Plaza’s opposition to the law had since softened, especially after CREATE was packaged as a stimulus measure meant to revive investments and pandemic-stricken businesses. “CREATE also has good provisions,” she said.
- Latest
- Trending
