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PEZA banking on LGU support for exemptions from TRAIN 2

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THE Philippine Economic Zone Authority (PEZA) said it hopes to attract more new investment this year, citing support from local government units (LGUs) to exempt the investment-promotion agency from the effects of the second round of tax reform.

“I am still very optimistic,” PEZA Director-General Charito B. Plaza told reporters on Friday when asked on her outlook for investment this year.

Investment pledges received by PEZA stood at P30.72 billion in the six months to June, down 40.2% year-on-year.

“I am happy that the local authorities, the Union of Local Authorities of the Philippines (ULAP)… passed a resolution, a strongly worded resolution which says they are appealing to the president and congress to exempt PEZA from the TRAIN 2,” Ms. Plaza added, referring to the second round of tax reform, known by the acronym TRAIN for Tax Reform for Inclusion and Acceleration.

“[T]his is the first time that the LGUs have learned about the program of PEZA. That we are giving incentives. They want to have a share of this spreading of jobs so they can also be ready to be federal states,” she added.

TRAIN, which took effect this year, reduced income taxes but imposed new excise taxes on diesel, liquefied petroleum gas, kerosene and bunker fuel for electricity generation.

TRAIN 2 seeks to reduce corporate income tax rate, while rationalizing the fiscal incentives system, creating uncertainty over the status of privileges enjoyed by economic zone locators.

The measure will cut the preferential corporate income tax rate to 15% from 30% but will replace the 5% perpetual gross income earned tax enjoyed by enterprises inside the PEZA ecozones.

Ms. Plaza, however, noted that locators have not shut down due to these uncertainties and have been taking a wait-and-see approach. — Janina C. Lim