MANILA — The Philippine Economic Zone Authority (PEZA) will insist that certain tax perks made available to investors remain, even as proponents of the Tax Reform for Acceleration and Inclusion’s (TRAIN) Package 2 seem dead set to trim perpetual incentives often granted by investment promotion agencies (IPAs), including PEZA.
As the government aims to modernize its incentives program for investors, PEZA Promotions and Public Relations Group Manager Elmer San Pascual told reporters that TRAIN Package 2 could be unconstitutional.
Under Package 2, the government will give a transition period of two to five years for companies currently enjoying the gross income earned (GIE).
PEZA grants a 5-percent GIE, in lieu of all taxes, except for real property tax, to its registered enterprises so long as they continue their operations in the country, San Pasqual explained.
However, with the proposed reform in TRAIN Package 2, this incentive could be changed.
San Pascual cited a provision in the 1987 Constitution on the inviolability of contract, which could be violated if the government pursues the scrapping of GIE after five years. Section 10 of Article III of the 1987 Constitution notes that “no law impairing the obligation of contracts shall be passed.”
“If they will legislate — violating that contract — that is, we think, and I personally think, a violation to the Constitution,” he said. San Pascual added that this will be included in the position paper of PEZA regarding the second package of the tax reform program currently being pushed by the Department of Finance.
Earlier, PEZA Director General Charito Plaza attributed the decline in investment approvals in the IPA in the first two months of the year to the uncertainties brought by TRAIN Package 2 to existing and potential investors.
Both Plaza and San Pascual said some companies are holding back their investment plans due to uncertainties in fiscal incentives under the second package of the tax reform program. (Kris Crismundo/PNA)
