THE Board of Investments (BOI) is eyeing to secure P1.2 trillion worth of investment pledges this year, while the Philippine Economic Zone Authority (Peza) is just looking to claw its way back to the P100-billion mark, in a display of the polarizing impact of the new tax law now on its final stage of bicameral deliberations in Congress.
Trade Undersecretary and BOI Managing Head Ceferino S. Rodolfo told the BusinessMirror he was instructed by his principal to target P1.2 trillion in investments this year. If the BOI manages to pull such an amount, it will beat its all-time high of P1.14 trillion recorded in 2019.
“He [Trade Secretary Ramon M. Lopez] is asking us to target P1.2 trillion,” Rodolfo said in a text message.
Investments registered with the BOI last year declined by more than 10 percent to P1.02 trillion, from P1.14 trillion in 2019. In spite of the drop, the agency managed to surpass its expectation that it will fail to touch the trillion-peso mark, as the Covid-19 lockdowns compelled investors to hold on to their capital and defer investment plans.
Lopez, who also sits as BOI chairman, has pinned his hopes of a capital surge this year on the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
The CREATE Act, approved last November 26 by the Senate, reduces corporate income tax (CIT) to 25 percent, from 30 percent, the highest rate among Southeast Asian economies. As for firms earning below P5 million yearly, their CIT would be brought down to 20 percent.
Legislators from both chambers are convening in a bicameral conference committee to come up with a measure that unifies the two versions they have passed.
The CREATE Act also sets up the Strategic Investment Priorities Plan (SIPP) that lists industries qualified to benefit from the new menu of fiscal incentives under the measure. Eligible projects can get up to seven years of tax break, to be followed by another 10 years of either reduced CIT or deductions in operating costs.
Government economists and industry groups have urged lawmakers to enact the measure into law within January, as businesses rely on the CIT cut to mitigate losses, especially of micro, small and medium enterprises bleeding from the Covid-19 pandemic.
As the BOI shoots to break the record books this year, the Peza tries to end a three-year streak of double-digit drops in investments. Last year, capital registered with the Peza declined by nearly a fifth to a little over P95 billion, as the health crisis prevented locators from building new factories and improving existing plants.
In an interview with the BusinessMirror, Peza Director General Charito B. Plaza said her agency will strive to climb back to the P100-billion level this year.
Based on Peza records, investments made in economic zones in 2020 plunged 19.15 percent to P95.03 billion, from P117.54 billion in 2019. Broken down, foreign capital improved more than 21 percent to P59.73 billion, from P49.26 billion; while local inflows crashed over 48 percent to P35.3 billion, from P68.29 billion. “Best aggressive Peza target [is] to attain three digits, more than a hundred billion against last year’s P95 billion,” Plaza disclosed.
To entice multinationals to set up shop in economic zones, the Peza has organized an investors forum with foreign embassies that will run every month. In February the event will center on the credit facilities Philippine banks can extend to investors, to be discussed by Governor Benjamin E. Diokno of the Bangko Sentral ng Pilipinas.
With the 19-percent decline last year, the Peza marked its third straight year of suffering double digit setbacks on investment approvals.
In 2019 investments applied with the agency fell by more than 16 percent to P117.4 billion, from P140.24 billion in 2018, on uncertainties inflicted by the move to restructure the tax system. The Peza, backed by its locators, had tried to block the passage of the CREATE Act.
While on one hand the measure brings down CIT rate, on the other it lifts incentives granted to investors to introduce new ones.
The CREATE Act removes, for one, the 5 percent tax on gross income earned paid in lieu of all local and national taxes that exporters had wanted to keep. Once the measure is enforced, they will be given up to 10 years to surrender the tax privilege, after which they will be covered by the new rules on taxation.